Good morning, ladies and gentlemen. Thank you for coming to this Capital Market Day of AEG. I'm glad to welcome you jointly with the management team and with another full member of our Board, Marjorie, Patrick, Alberto, Mark. So we are sharing this day in this presentation with you 7 out of the 12 board member of 5 gs and glad for that. And well the investment grade status by credit agencies.
Moody's ordered the BWA3 and Standard put the BBB- This reflects the continued strength of our business, provide a solid platform to deliver the Group financial target and is giving IG access to a broader range of financing alternative and at a lower cost. So we're happy for it and we believe it's a wonderful news. Just a few remarks as far as the economic environment and which in general has been in 2018 positive in our core market with some unsurprisingly part of Latin America showing some softness in the last quarter and the Q3. The rise in oil price has been posing a challenge in the company, but we have been so far successfully in mitigate this impact with hedging, with the revenue management and with cost control. And perhaps even more concern is a disruption caused by the tightness of the air traffic control in Europe and the regular APC strikes in France during the last summer.
As far as Brexit is concerned, Brexit's uncertainty has so far not affected DaiGe's underlying trading environment
up to
now. And we're confident that we will be able to operate as normal beyond March 29 next year and contingency plans are in place in the event of no deal. We are engaging with all the governments and authorities related to Brexit in such a way that we remain confident that a comprehensive air transport deal will be agreed between the European Union and the United Kingdom. As a matter of fact, the liberalization of the aviation has been a great success story benefiting millions and millions of people and is of the essence that a kind of agreement has to be reached. As far as the shareholder returns and capital allocation is concerned, we have announced an interim dividend at the presentation of the result of the last quarter last week of $0.145 which means 16% higher than the 12 $0.05 a year ago.
This demonstrates the Board's confidence on IG Financial strength and the outlook of the company. Last week we also completed the 2nd share buyback program of 500,000,000 to make a total cash return to shareholder this year of over 1,000,000,000 dollars In total, following the recent interim dividend announcement, we will have returned $2,700,000,000 to shareholders since IG started paying dividend in 2015. Shareholder cash return in 2018 represented yield of around 8% of the current share price which is placing us in the top 10 FTSE 100 entities excluding financial companies. And regarding the excess of capital, the Board is and will be routinely evaluating M and A opportunities versus shareholder return. As far as the governance and environmental sustainability is concerned, 2 new members have joined the IG Board since the last Capital Market Day, having Nicola show and Deborah Kerr in the Nicola in January, Deborah in the month of July.
Nicola brings substantial experience in the transport sector, public policy, regulatory affairs and she is currently Executive Director of National Grid and is a former non executive of Erlingus. Deborah brings invaluable technology and IT experience to the board including relevant airline technology experience and having spent much of her career in Sabre and Hewlett Packard. She also brings a very substantial knowledge of the U. S. Environment.
Finally, I'm pleased
as far as the corporate governance the governance of the company is concerned. I'm pleased to share with you that we have been awarded by the top price for corporate governance in Spain which is Emmanuel Olivencia is equivalent to the Lord Davies of the United Kingdom price which means that the investment community in Spain is recognizing the effort of 5 gs as far as the corporate governance is concerned. I hope you will enjoy the presentation today. You will have a lot of information from our company And I hand over to Willie Wilcz.
Thank you, Antonio. Good morning, everyone. Welcome. As Andrew said, this is our 8th Capital Markets Day or if I include British Airways now my 14th, and I think we're getting better at it. So I think you'll enjoy today.
We're going to do it slightly different in that we've included a couple of slides in the presentation, which set out the investment case for IOG and you will have seen those slides before, but we're just going to elaborate a little bit on that before we get into the specific presentations from each of the operating companies. Now, those of you who will have listened to me over the years will remember that I've been arguing that this is a, excuse me, a very different industry today than the one that I joined almost 40 years ago now. We've seen a lot of change. A lot of issues have finally been addressed. And I believe we're now in a position to really look forward with great confidence about investing in this industry.
And we'll talk a little bit about this as we go through the presentation. So, our initial focus will be on the left hand side of the chart. You'll get the operating companies. We'll talk about their individual plans and then Enrique will come back and talk about the right hand side of the chart before at the end of the day we give you an opportunity to ask us questions. Now, this is a good industry.
It's always been a growth industry, but as you can see from this chart, it's never really been until recently an industry that creates value. And we've talked about this a lot over the years. You can see the performance of the industry between 'forty seven and 2,009, very significant growth, but destruction of value and that has changed. I have argued that it changed some time ago, but you can particularly trace it back to behavior in the industry following the collapse of Lehman's in 2,008 and the way the industry responded to that crisis, the speed with which it responded and the approach that was adopted to the rational growth and capacity alignment post that crisis. And that has led to a much more favorable position in the period in the past 8 years, 2010 to 2017, still strong growth, 6% compound, but very profitable.
And for those of you who say, well, that's because of the oil price, you've got to remember, in the 10 years prior to this, so 2000 to 2,009, oil represented about 21% of the industry's cost base. And during that period, the net losses were about 48,000,000,000 dollars In the period 2010 to 2017, oil represents around 28% at an industry level, and you can see the profitability. So this is an industry that has adapted to the volatility in the oil price and adapted to a higher oil price. And I think we demonstrated that very well from an IG point of view during 2018 with the financial performance that we have reported to date. Now, what's behind this big change?
I think there are a number of issues. We've seen less state intervention. We still see some political intervention, but we don't see and that's a positive and they're replaced by efficient airlines. A rule of thumb we use is that about 70% of the capacity that they provided gets replaced by efficient airlines, clearly making the industry more efficient. And I believe that's going to be a feature, an even more important feature going forward.
We've seen restructured labor agreements. In the U. S, that's been through Chapter 11. In Europe, it's been through hard work. And I think we've demonstrated that better than anybody else.
We've seen technology. We've seen a shift in how we engage with our customers, how we engage with, as Stephen would say, our guests. We've given them greater visibility, greater choice, and we've reduced our costs. A great example of where cost reduction leads to improved efficiency and better customer service. And that's the feature of all of the investments that we make in our airlines today.
And you can see, we've looked at additional ways of getting the maximum amount from our customers in a way that gives them the choice. So we're responding to consumer driven demands and we're responding in a way that makes sense and makes profit for our industry. And most importantly, I think we've got a different breed of management, different breed of executives, driven to ensure that shareholders get rewarded for their trust, their investment in the industry in a way that you hadn't seen in the past. And that's much more common today. I think there have always been very good airlines.
Historically, you look at Southwest, you look at Ryanair, who have always been driven to do that. But more and more we see that as a feature of the industry and a feature of the executives within the industry. And clearly then consolidation has played its part. And the consolidation is something that we talk about a lot in the U. S.
Because you've seen significant consolidation there. And this shows seat share. So you can see the top five U. S. Carriers with 86% of the total market and that's been well documented and I think has been one of the reasons why the industry in the U.
S. Has proven to be more profitable in recent years. Now the industry in Europe is more fragmented and that's well known, but actually there has been consolidation too. And it's probably not as recognized the level of consolidation that has taken place in Europe in the past 10 years or so. And you can see here 63% of the markets, again seats with the top 5 carriers.
So, more fragmented, but equally a consolidated industry and nobody can argue that it's not competitive. I would argue in fact that the European intra European market is probably one of the most competitive, if not the most competitive industries around. And yet we have been able to do this and be profitable to give better customer service, better choice, a wider range of opportunities for customers and better profitability. And if you look at the way that consolidation has taken place, it has been quite interesting. You can see obviously going back to 2,008, we're at 43% in the top 5, now 63%.
And clearly, that's been as a result of the consolidations that has taken place, but also a result of the week leaving the industry. And importantly, although barriers to entry remain relatively low, fewer new entrants. And that's because we see better quality investors as well, no longer prepared to give their money to people who will absolutely destroy it. So the industry is a more rational industry, good growth, 2% compounds. The consolidated part of the industry has grown by over 6% compounds and the others have shrunk naturally as a result of that consolidation, but also as a result of the week leaving the industry.
Now, if I look at long haul, it's a slightly different picture, but actually a very interesting scenario that sometimes is overlooked by people who aren't close to the industry. And I point to the pink bar here. This is the amount of capacity by the top 3. These are long haul ASKs in to our out of Europe. So it's a very interesting scenario.
You can see there the top 3 non JBA, 33% to 33%. But what has happened is in the joint businesses, the joint ventures, which is a form of consolidation, not the most efficient form of consolidation, but it is a form of consolidation has grown by 1% from 1% to 19%. And obviously another feature of this has been the development of the Middle East, the big Middle East carriers going from 4% in 2,008 to 9%. But equally, long haul has seen some consolidation, remains highly competitive, a lot of choice, good value and significant growth in that market, indeed faster growth 3.8% compound over the period. So consolidation has taken place in the industry and has been part of the solution to the industry's historical chronic loss making performance.
And we played an important part in that. Since we created IAG, we've seen the 1st full year of the transatlantic joint business. That agreement was signed in October 2010, just before the merger and the creation of IAG, we've seen the acquisition of BMI, very efficient acquisition, an important development for British Airways, as you know, it was principally around the slot portfolio that BMI had at Heathrow, giving us 42 net of the remedies, 42 additional slots at Heathrow, which BA continue to maximize. There's still scope for BA to facilitate their long haul growth and you'll see Alex talk about that later on. We had the Siberian joint business with Jial.
We've seen Finnair join both the transatlantic and the Siberian joint business. Very efficient acquisitions by IHE, 1st and foremost, Welling, which has been a great success. And laterally, Aer Lingus, I would argue, probably one of the best acquisitions that anybody has ever made. And obviously, I am a little bit biased, but a great performance. Stephen is here today and I hope you'll join me later on in congratulating him.
Obviously, I'm very sad to see him decide to leave. The right decision for Steve and the wrong decision for us, but I'm really pleased that he has agreed to stay on the Board of Arlingus and will continue to provide valuable insights in the way he has during this period there. And Sean Doyle, who will take over from Stephens also here, Many of you will have met Sean, but he's here today and hope to take the opportunity to meet with him. We have a joint business. We're the only ones with a joint business, one of the Middle East carriers, and that's been very efficient for us.
The scale of activity there may not be very large relative to the Other Joy business, but there is a lot of scope in that relationship. And then we acquired the Monarch Slots, again, very efficient form of consolidation for IAG. And recently, just last couple of days, we've had approval from the Chilean authorities in relation to the LATAM joint business. Now we're evaluating that to better understand. I'll have to be honest, our focus has been very much on these presentations today.
So we haven't really had time to get into that in a lot of detail, but we will be doing that in consultation with LATAM to better understand the remedies that the regulator has identified in relation to that. Now, what is unique about IAG? You could look at this structure and say, well, lots of companies have similar structures like this. So what makes you very special? Well, I would argue we are very special.
And I would argue that because we were slightly late to the game in terms of consolidation, we were able to witness what others did well and what we believe others did wrong and we avoided some of those pitfalls. Now we have a very solid base. We've got a joint cargo business, Avios, our common currency. We do a lot of activity on maintenance and fleet, and there's a lot of value to be unlocked there. And I think we do that better than anybody else.
There's others who talk about that, but we've actually taken it to a different level and do that very well. We've got GBS, which delivers very efficient back office support for all of the airlines. Digital, we set it up to exploit the opportunities that are out there and you'll see some of those here today and I hope to take an opportunity to talk to the people. And then very recently, ING Connect and you're going to see some more about that later on. We have very efficient airlines, strong brands, competing in different segments of the markets, the full service, the value and the low cost.
And we do that in a way that nobody else can do it, because when you look above this, we have IAG as the parent company. Now, I've always been annoyed when people talk about us as a holding company. We're not a holding company. We don't just sit there exercising control over the assets or the shares. We are actively involved in ensuring that we get the maximum amount of efficiency out of the airlines and the businesses within the group.
So, we are as somebody put it, I like this, we exert vertical and horizontal influence across the group. That sounds like Irish dancing actually, but that is what we do. We don't just sit there and take what people give to us. We input into the operating airlines in a constructive way. We do this where we believe we can add value.
We do this where we take the benefit of all of the experience around the group and we do it collectively and that's what's important. We have a lot of experience at the center and we use that experience to ensure that we are getting the maximum amount of value out of us. We set the long term vision for the group, but the operating companies are very focused on what they need to do to ensure they deliver great service to their customers, that they're clear in terms of the market segments they're serving. And you'll get a lot more insight into this in a moment. They've got a real understanding of the competition that they face individually and collectively.
And they have P and L responsibility. That's very important. They are responsible. They are accountable for the financial performance of each of the operating companies. And that creates great competition.
It creates tension, which is very positive. And actually, let's be honest, we have a bit of fun around this as well. So we are different. And we're different and that difference makes us better and makes us more efficient. And that's proven I think in the way we operate.
It's a very simple structure. We're based on one of the floor plates here at British Airways headquarters. Some of you will have visited us. It's all open plan. I sit in the middle here.
I have visibility on pretty much everything that goes on. People like me to be visible. So they can see me, I can see them. And this is one of the benefits that we have. It's very efficient.
We can get together quickly. We can talk to one another when issues arise. Oh, yes, sorry. This was a photograph taken the other night. You can see the only people in the office are the IR team over there.
I think this was taken at about 10:30 at night. But you can see from my desk, I can pretty much see 80% of this. If I'm head down, I can hear the people walking by. So it's a very efficient structure and it enables us to move fast and to address issues in a quick way. This is the management committee.
And we put this in the order in which people normally sit around the table. These positions here, they're sort of permanent because we're always in early. And then there's a bit of jostling for these positions here as people come in and try and get to see. But that's normally where people will sit. So we meet on a weekly basis.
You can see we've got the CEOs of the major airlines and the operating entities like cargo and avios and we debate all of the issues. So, weekly meeting normally lasts for about 3 hours and then once a week we meet for 7 or 8 hours to discuss more strategic issues. And that again is the benefit of this. We have time to debate the big issues in a way that an operating airline gets distracted by the day to day operational challenges. And we've seen a lot of those particularly from ATC in the past year.
So why are we different? Well, I would say parent neutrality is probably one of the keys. We are completely neutral. Some people will say I show favoritism towards Aer Lingus. I don't.
I have clearly a fondness for Aer Lingus. But I like Aer Lingus because of the financial performance that it delivers. And that's why Aer Lingus gets favorable treatment because they are delivering. Now if they don't deliver to the way they are, somebody else will get more favorable treatment. We are completely neutral.
And this is important because other structures don't have that neutrality. They're dominated by the lead brands. And that is inefficient because that will always lead to investments that is favorable to the brand rather than favorable to the financial performance and favorable to the shareholders. And we've seen that. It's the reason we are the only ones who have successfully been able to develop a low cost airline as a subsidiary of 1 of the full service airlines.
Iberia Express as a subsidiary of Iberia. Two reasons for that. The first is Luis Gallego, who set it up. So, he has an interest in ensuring that that is successful. And the second is, we at IAG won't allow what traditionally happens and that is where the parent company tries to kill the young, efficient, low cost.
And that's historically what has happened, because they don't want to see the competition. They don't want to see the difference in efficiency. We love it and we thrive on it. And that makes us different to others who have tried to do this. And that makes us more efficient, more targeted and for you a better investment.
And you can see some of the other issues. We've got complementary hubs. When we did this first, we spelled that complementary with an I instead of an E and I said I love that, free hubs. Unfortunately, they're not. We have to pay for them.
Plug and play, we can put in new parts to this and get efficiency very quickly. We've got very robust positioning and I think an extremely attractive portfolio of businesses and brands. And Robert is going to talk about that in a moment. Now, it also as I said enables us to move fast. We've got a track record in terms of value creation.
I think it speaks for itself. We set ourselves challenging targets, but targets that we believe are right for the business and can be achieved and they're balanced targets. We don't drive the business to achieve one target. We have a balanced approach. We ensure that the targets are right, but that they facilitate investment in the right areas proving that we can make investments that make a proper return.
We faced up to the tough challenges. We've talked about the transformation of Iberia, which I believe is an example, probably the best example of true transformation in the airline industry, a fantastic turnaround. And as a result of the acquisitions, we've been able to see margin expansion, so efficient acquisitions to date. Speed, we can move fast. The launch of Level I think is a great example of that.
We talked about it at our annual strategy meeting with the Board in September 20 16. Our original attention actually was to look at launching long haul low cost in 2018, but we believed we could do better than that. So we got board approval in February. We announced the launch of Level from Barcelona on the 17th March. We got flying the first flight from Barcelona to Los Angeles on the 1st June 2017.
Very short periods, very clear, very concise analysis, absolutely focused on what it is we wanted to do, short lead in time, but very efficient launch and that's been a great success. We did the same then with level out of Paris, the 2nd long haul base for level and level out of Vienna. So we can move quickly. We're not afraid to make some mistakes. We learn from our mistakes.
We become better. And if we get something that we got wrong, we correct it and we move on. So this is a business that's very efficient, facilitated by the structure that we have and we'll continue to do that. We've got an excellent platform. Synergies can be delivered very quickly and this really does work for you.
You can see some of the things that we've done here. Joint cargo to ensure that we get the maximum benefit out of the global network that we have, very important from a cargo point of view. Going through to the creation of digital and I said you'll see examples of that today. So how do we work? What is the process that we follow?
Well, actually it's quite simple. When we look at our business planning cycle, the team at the center in our strategy and finance department get together with the strategy people in the airlines And we agree a common set of fundamentals. We look at what's the fuel price going to be. So we don't have 4 different fuel prices. We look at GDP growth across the globe, particularly in our key markets.
We look at what inflation is going to be and we get a common view on that. And this helps then to be able to get a common approach to all of these issues. So we start off getting the framework right. Then at the center, we say, here's what we want to focus on this planning cycle. The operating companies go and they look at the size and the shape and the competition, what are their competitors going to do.
So they would take their first cut at what the network developments would be, the investments that they would require, particularly around fleet, but also non fleet, and then they come back and they present that. And we collectively assess this at the management committee, and we share the benefit. It's really important. If you get Iberia flying to Latin America and BA flying to Latin America, they should have a common understanding of that market. But clearly, Iberia has a better understanding of the market given their presence, their history, their knowledge, their people on the floor there.
They can tap into greater sources of information. So we share that to ensure that we get to a common position that makes sense. But the operating companies understand better what their individual competitors will be doing in each of those markets. It's an iterative process. We bring it back, we debate it.
And then finally, we take it to the management committee where we as a group sign off on each of the plans. We sign off on the individual operating company plan and we sign off on the collective plan before we bring it to the Board normally in September, we spend 2, 2.5 days with our Board debating that, discussing all of the issues that we've identified, getting great constructive challenge from our Board members. We go back after that challenge, we finalize it and we bring it back in October to get approved by the Board and then we present it to you. And that's the process that we follow. It's very efficient.
It doesn't take up a lot of resources. It maximizes the value of the resources at the center to ensure that each of the individual operating companies don't have to go off and do all of this work on their own. And that maximizes the intelligence and the network that we have around the table. So an efficient process, which then clearly identifies where the capital is going to be allocated and allocating that capital in the most efficient way. Cost efficiency, I've always been proud of what we've achieved in improving our cost performance.
Some people think cost focus is wrong. It suggests something negative. I completely disagree. To me, this is all about efficiency. This is how do we drive this industry to be more efficient.
And I think we do that very well. And there's a lot more that we can do. The track record is excellent, 11.5% reduction to date. But you can see it's not even. We will make investments when investments need to be made.
We're not afraid to make investments. In fact, that's the beauty of this. We know that to ensure that we have long term value being created in this business. We've got to invest in each of the operating companies today. But we have targeted investment knowing that we'll get a proper return on those.
So investments will be made, but there's a lot more that we can do. Group synergies, we've delivered and exceeded all of the targets that we had set for ourselves. And this is very important because people take that for granted. They look at the financial performance of British Airways and they say, well, BA is great on its own. BA is good on its own, but BA is great because of the efficiency that BA gets from the synergies that have been created by IAG.
BA's financial performance would not be as strong today if it was standalone entity. And the same applies to all of the airlines within the group. And there is still more to come. You've got British Airways Pan 4 which is being developed, Plan de Futura Part 2 that you'll talk about that we'll talk about, welling, Aer Lingus fantastic success, the simple value model, grow the business, reduce your unit costs, use that reduction in unit costs to offer lower fares, drive demand, grow your business, reduce your unit cost, use that. It's fantastic and it's proven to work and it's been a great demonstration of how we can take an efficient airline that had ambition and allow it to really unleash the potential of the business as part of the group.
And we'll talk about level as well. We believe that this is a segment of the market that will be profitable, that can be profitable, that should be profitable, but only if you've got the right model. And some of the people in this segment have not got a model that will work. We believe we have. If you look at our performance versus some of our competitors, I'm not going to identify them.
You're all the experts in this area. So you can identify them for yourselves. But it's good. It's a good track record. And we have this target of 1% improvement per annum non fuel unit costs.
It's not going to be 1% every year. It's a target that we believe is relevant and achievable. Some years we'll do better than that and some years we won't do as well. Some years we'll be making investments and therefore that 1% will not be achieved. But that investment will deliver the cumulative 1% as we go forward.
And that's important. We don't look at this on a 1 year planning cycle. We look at this on at least 5 years and in many cases longer than 5 years because many of the investments we will make will be long term investments for the benefit of the business, but a good track record to date relative to our competitors. And I know you guys love these charts. And we look at it all the time.
So we stuck it in there, so you can have something to look at during the coffee break. But we're well positioned. Each of the individual airlines well positioned against their major competitors. We're not I've always said this, Ryanair is an excellent company with a very efficient cost base. But we do a lot of things really well and they do a lot of things really well.
And we've learned from some of the things they've done. And it's interesting actually that I hear them talking about mirroring some of the issues that we've addressed as well. So we learn from our competitors and we're all the time making sure that we're looking at how they've improved their performance and whether there's benefit to us in doing some of the things they've done. So well positioned in an industry that is well positioned, in an industry that is different. We are the best in the industry.
We are the best because we are unique in terms of how we approach this. We are the best because we've got the best brands and the best hubs and we have the focus that is required from this industry to ensure that we will have long term success. I'm going to hand over now to Robert who will take you through a more detailed presentation on some of the brand work that we've done.
Thanks, Willie.
Okay. Good morning, everyone. I'm going to talk about our customers and our brands. Before I get into the customer segmentation and where our brands are positioned in the market, I just wanted to give you a couple of bits of data. First of all, about our geographical mix of revenue.
So this is the group's revenue split by point of sale. So probably not a surprise to any of you that the U. K. Is our biggest market, 32%. But actually our 2nd biggest market is actually North America at 21%.
It's a big market for all of our long haul airlines. After that, obviously, Spain and then the rest of Europe. So we are pretty diversified, much more diversified than any of the individual airlines would be by themselves. We're also diversified in terms of the industry sectors of our corporate customers. This chart here breaks out the mix of our business.
You can see there's a large part of the month part of our revenue, which is actually in the non delt, non premium business. So this is largely leisure type traffic. And the bit that you are probably most familiar with, which is the big corporations in the financial sector, represents only 2.6 percent of our group revenue. So although we wouldn't deny that the future of the financial services industry here in London is an important factor for us because we have a very strong position in it, nowadays it's wrong to think of that as being the bedrock of the group business. We are very diversified in terms of both geography and industry sector.
So about a year ago, we sat down as a management team and with the Board and said we want to do a more systematic piece of research to understand our customers, the customer segmentation and where each of our brands was positioned and where we wanted it to be positioned. And although the segments that came out of that at a macro level may look quite straightforward, they're probably what you might have sat down and written if you are familiar with the industry, Behavior, customer choice differs by the trip and the cabin you're flying in, the expectations and the purchasing criteria, if you're flying in a long haul business class cabin are very different than you're taking a 1 hour trip in an economy cabin for leisure. Nevertheless, this we let this emerge from the data that we did. We did a very expensive piece of primary market research across all our major markets to make sure we understood both the similarities across the markets and the differences. Well actually we found really an awful lot of commonality across the different geographical markets.
One of the aspects that came out of that was what's written here is attitude. Within the economy cabin, there is actually even for people flying on leisure, there's actually a split between those that are pretty much just totally price driven and those that are actually making more of a balanced decision. Price is very important, but willing to trade that off against other service attributes. And that's what we call here the value mindset, whether you're in a trading down or a trading up mindset. When you quantify those segments and map them on to a breakdown of the market, you come up with the 7 key customer segments or demand spaces as we call them here.
Just to explain the chart, along the vertical axis you have whether you're traveling for business, whether you're traveling for leisure and then we split the leisure travel into the more or less than 5 hours. That's the point at which the data tells us that the customer behavior, the customer purchasing criteria really begins to shift in terms of what they're looking for. We don't interestingly, we don't really see so much of a difference in the business market. On the across the page, we have the which cabin are they flying in. Right hand side, you have the premium cabins, so Club World and First in case of BA.
And the other two segments split between this value mindset, whether you are essentially pretty purely price driven or whether you're making more of a balanced value decision. And just across the top, we've given you for the market as a whole how that those sort of 3 big columns break down. And really all of the point I want to make with this chart is that all of these segments are sizable segments. And as a carrier that set itself or a group that set itself an ambition to be leading in the industry as a whole, we absolutely want to and are players in each of these segments, but with brands and customer propositions and business models that can be successful for the needs of those segments. So one of the other outputs of the work that we did was to really quantify properly what the relative importance of all of the attributes was.
And overall, when you look at the typical range of prices in the market from the highest prices to the lowest prices, price drives about 45% of customer buying behavior. Number 2 is network and schedule. Is there a flight at a convenient time goes nonstop rather than connecting? That's the second biggest important thing. And then brand here is essentially everything else.
So brand really stands for both the intangible emotional parts of the brand but also the functional parts of the experience. What is the seat like? Are you on time and so forth? And across those segments that I talked about before, and they've lined them up essentially in order of price sensitivity. You can see that the most price commoditized segment of that, no surprise, the short haul leisure segment, where 52% of the purchasing decision is basically driven by price.
And therefore having the cost base and the right price proposition in the market is absolutely key to success there. But even there and I think Ryan and Eric has belatedly realized this, actually brand and customer experience is still an important factor particularly where as is often the case nowadays the schedule and the price are the same. That's the point where the brand and the customer experience makes the difference. And then likewise, if you go right the way to the other end of the chart, the long haul premium business segment, there price is still an important component, 30% is still driven by price. So even for our most premium oriented carriers making sure that they have the right cost base is still an important factor.
Okay. So let's turn now to the brands themselves. So this is all about how the customers perceive brands. And again this came out of the primary research that we did. This is an illustrative chart just to introduce the concepts that I'm going to talk about in a second.
So again you see the same segments here, the most price sensitive to the most experience sensitive. And examples of a brand, the Red brand here would be one that is clearly very oriented. People associate with a classy high quality reliable proposition. But you wouldn't go there if you're looking for a cheap seat. Yes.
The blue one here is the opposite orientation where a brand that people strongly associate with value, cheap prices, but not necessarily with top quality. And the point in here is that if you try as many of our competitors do to serve all parts of this market with a single brand, you tend to end up with a line that looks like that sort of gray line in the middle. Customers don't really associate you with anything. You're kind of a well they're an airline. I don't really have any other strong associations with them.
And we believe that's the wrong way to address the market. We believe that competing with portfolio brands, each of which is targeted properly at the segments, gives us the best overall financial results and coverage. So how do our brands stack up? Let me start here with the of all of the brands that were included in our research, which brand came out top? The brand that was associated most strongly with what the customers in that segment were looking for.
And you can see there and this we did this research in the home markets, so the major markets that we have. And actually Emirates came out very strongly at the right hand end of the chart. Probably not too much of a surprise to you, the marketing is very heavily on the premium traffic. They spend an enormous amount of money to build that brand. And they came out as the high point of association there.
Again, probably no surprise, if you're looking for a cheap seat Ryanair is the name that comes most strongly to mind, most strongly associated with price. Interesting we see in the long haul frugal space, some of the new airlines like Wow also coming strongly there. A little bit less a bit
more muddled in the middle of
the market, probably Easyjet came out the top for the trade up short haul leisure flyer. And actually Norwegian coming out actually the strongest ones that we had for if you're traveling on business but you are on a budget, you're price sensitive but traveling for the purpose of business. So where do our brands come out? And this data is from when we did the research which is over a year ago now. We're in the process of updating it at the moment.
But I think it tells you the story of where the brand sit. Brand perceptions change slowly over time. So I don't think that the positions have changed markedly since. But our 2 premium oriented brands, Iberia and British Airways came out very strongly in fact. Again this is customer perceptions in their home market.
So Iberia in Spain, British Airways in the U. K. You can see almost only just slightly picked by Emirates for the leisure indulgence segment, but lagging behind where we wanted to be at the classy business end. And Alex will talk more about all the investments we're making to shift them position there. Other notes, Iberia came out reasonably poorly on the trade up economy cabin in long haul and that's really because they didn't have at the time of this research a premium economy cabin.
About half of the customers in that segment are traveling in a premium economy cabin for long haul and they didn't have a product. Obviously, now launched that. You can see it out in the foyer, the product they've got in the market. And we are starting to see that customer perception shift over time as the product is rolled out. And really neither of these two brands are the ones you'd want to use if you're aiming for the price sensitive segment.
I often describe it as if you've got a it's not you've got a discount store on the high street, it doesn't matter how good your prices are, how cheap they are, if you put Harrods on the front of the shop, you're not going to sell very many things. The 2 low cost brands that we have, welling comes out pretty strongly but with some extra work to do. Level, this was this is the perception in Spain because at the time we ran the research that was really the only place where the brand was known well enough to get some meaningful results. Vincent will share some more recent results in a second which reinforce this. Frankly, we've got the brand exactly right in terms of the associations that people are looking for in that segment.
Erlingus is an interesting one. Erlingus' biggest and most important market is the U. S. And there you can see they come out strongly at the frugal end. They emphasize value, price and the perceptions are matching that.
And we put on here by way of just comparison how British Airways is perceived in the U. S. Market. Again not as good as we would like at the far right of the chart. But also Norwegian with probably the best known of all of the low cost long haul brands.
And you can see that Aer Lingus is just a little bit less associated with pricing than they are, probably reflects their positioning. So we think the brand and customer experience bit is very important. You've got to get your cost base right. You've got to get your leadership positions and network right because those are the 2 biggest drivers of customer choice. But brand and customer experience are crucially important And we believe in having a portfolio that targets between them the different market segments.
And although the positioning of our brands is in the right place as to where we want them to be, there's a gap there from we want that first chart where we show the who has the best brand for the segment. Want an IAG brands to be top of all of those segments. And the operating companies will talk later about what they're doing to with targeted investment to address that. On the network and schedule point, obviously you get that by having the best network spread of routes, frequency at convenient times. And I'm going to talk a little bit about that now.
When we formed IAG back in 2011, we had 2 brands, Iberia and British Airways, both in the full service carrier space. But over time through a combination of acquisition, organic growth and organic launch with Level, we've shifted the balance of the portfolio more towards the value price driven end of the market. Because as I said, as a group, we believe we can be successful and we want to be leaders in all of these parts of the market. And between by today, we've got to the point where actually almost a quarter of our capacity was actually not in the full service carrier segments. And as we play forward the plans that we've got over the next 5 years and we'll talk again a little bit later on the growth rates, it's important to recognize that growth is concentrated in that low cost and the value carrier part of the market.
And so by 2023, if our plans don't change and undoubtedly plans will have to adapt over that time, but we would see a shift where getting on for a third of the group capacity would be in those value segments. We have great hubs which are complementary still with an E and each can play to its unique strengths. So we have Dublin Hub fantastic positioning from a a geographical point of view, some great cost advantages from being the nearest point of Europe to the U. S. We have Iberia with fantastic network positioning for Latin America, again the perfect place from a geographical and market point of view.
And then we have BA which I have to put on last because otherwise you wouldn't see the others. London, a much broader all round long haul network from the largest air transport market in the world. And we have leadership positions in each of our home cities. So I've given you here some data both on a revenue share perspective and on a passenger share perspective as to where IAG sits in each of its main markets. The difference between the two charts you can see most strikingly in Dublin where if you measure by passenger share, which emphasizes the short haul market, that's the only metric on which we're not number 1 with Ryanair there being ahead.
But on a revenue share basis where you bring in the long haul business with a higher weighting, we're actually the number one even in Dublin. We're not complacent about this position. Only 30% of revenue share in London, our biggest market, we think we can do better over time. And as that consolidation story plays out, where the strong gets stronger and the weak wither for exit, we believe there's further opportunity. There's a lot of scope there to increase our position in all of our markets.
But we've come with a very good solid leadership position to build it on. So between William and myself, we've taken you through the top four of these boxes on the left hand side of the chart. We're not going to talk about innovation just now. We're going to come I'm going to come back just before the lunch break to talk about that. When we go to the coffee break, which isn't quite yet, but when we do, please I encourage you all to go around the corner and visit.
We've got 4 of our startups that we're working with there to tell you about some of the work that we're doing with them in the innovation space. And with that, I think I'm going to hand over to Vincent, our newest CEO, who has joined the group to talk to you about the Level story.
Thanks, Robert. Good morning, everybody. It's a great pleasure for me to be with you guys today. 2 months into the role, There is still a lot for me to learn about working as part of the IAG Group. But I've spent the last 2 months really getting to understand what level is all about And we're very much looking forward in future once I take you through how we're going to do it to becoming getting that preferential treatment from Willie for delivering the best financial returns in the group.
A little bit about me, I think there are two reasons fundamentally why IAG selected me for this particular role. The first of those is where I think there's a very close alignment between the way that I think about what a low cost long haul airline experience should be. And the second part is a combination of different pieces of experience over different parts of my career that were very, very closely tied to the way that the level model is built. And that's low cost, ultra low cost experience in Mexico, it's low cost long haul experience through the Jetstar Group. It's working in a multi AOC environment, which I did with Taka and a multi brand environment between Qantas and Jetstar.
And I think that particular combination of global experience with each of those particular different elements ties really, really well to what the Level story is all about. And the Level story really is about and I've tried to sum it up in a single sentence, building the customer centric technologically enabled airline business model of the future. That to me for myself and the team is the particular mission that we have. And it's easy enough to say that. Think every airline in the world would say yes, we're customer centric.
But it's very difficult I think for an airline to be truly customer centric when the vast majority of the airline is focused on delivering operational production. The typical vertically integrated model of what an airline is does focus you much more on production and operation than it does towards the customer. And so as we get to start a new airline model, as we get to build something from scratch, we can build into the design of that business through customer centricity with every element of the business designed around what the customer needs are. And particularly in the modern world, I'll talk a little bit more about this in a minute, but particularly in the modern world where the customer is being given biotechnology so much more control than they've ever had before over the way that they purchase and the way that they consume product, doing that from the design phase of the business is critically important. The technology enables us to deliver a better level of service, a better level of product than historically we would have been able to deliver without that technology.
So it allows us to lower the cost, but at the same time allows us to extract more revenue from the consumer than a traditional model. And the last part is particularly important. When we talk about when we think about what an airline is, that vertically integrated model, it's a restrictive structure. It prevents you from being flexible and responsive. The ship is too big to turn quickly.
And so in the way that we are building level, we're not building it as an airline, we're building it as a modular structure that enables us to be much more responsive, much more adaptable to change. And in the minds of the people involved in the team at least, what we're doing is taking the idea of what an airline is to a whole new level because it's not about where we are today, it's about where we're going to be in 10 years' time, in 20 years' time as an industry. And we want to make sure that Level is the vehicle which is able to grow and be successful in that dynamic environment. So where are we today? Taking into account both our long haul and short haul businesses, we have 3 bases and 9 aircraft.
As Willie mentioned, we only started operations in July last year. So 15 months into operation, we already have 22 routes, have carried more than 700,000 passengers. And thinking just about the routes that we've operated for a full 12 month cycle that are just in the 1st few months of their growth, We're achieving a load factor of above 90% on our long haul routes. I want to take a step back perhaps and think about what was the strategic rationale. Where did we come from in terms of building the little business?
And at a core, it was really about allowing IAG to target that growing price sensitive leisure segment. Robert talked about it before as the frugal fun and frugal first segments. But everything that Robert was saying is built into the design of what Level is. That concept of the full service brands being able to focus their attention on serving customers who desire and who value that full service experience. That means that Level can focus on being a price sensitive on the segment which is price sensitive and tailor everything that we do to that particular model.
Because where you have businesses that are much more focused on the specific needs of their customer segments, your probability of success, your probability of achieving above market returns are significantly higher. And that's an experience that I learned personally with Qantas and Jetstar, where we found that where Qantas was competing purely against this competition, Qantas would win the premium segment but would lose the value segment. When Jetstar was competing against exactly the same competitor, Jetstar would win the price sensitive segment that would lose the premium segment. And so in competing against either one of those models, the competitor was doing quite well. But when we combine the 2 together, when we had Jetstar and Qantas together competing against the same competitor, Qantas won the premium segment, Jepstar won the price sensitive segment, and the competitor was squeezed in the middle between the 2.
And so we know that by focusing on those brands, we increase our chance of success. I think there are some other advantages, some other reasons for why IAG would invest in a low cost long haul carrier. And part of that is about opening access to new segments of the market. The lower cost base of Level allows us to successfully enter markets that perhaps we could not have entered without such a low cost vehicle. We're doing it with a brand that has cross border appeal that is not tied to any particular geographic segment.
And we're doing that in a way that for the rest of the group, we're able to demonstrate what can be achieved with new approaches, new technologies, both in terms of further opportunities to reduce the cost of operation in all of the operating businesses, but secondly, in terms of what we can deliver in terms of ancillary revenue generation by using the technology in a really clever way. And I'll give you some examples of how we're doing that and how that's working in our operation already. As I said before, Level is not an airline which is a kind of a strange thing to say for somebody who's part of what would be considered to be an airline group. Level is on one hand a brand and a customer concept. And on the other side is a business model, but it's not specifically an airline.
If you think about the Spanish operations that Level has, they're operated by our sister carrier Iberia. The operations that we have in Paris are operated by the former BA subsidiary Open Skies, which is now part of Level, Fly Level has held. And the 3rd part, our Austrian operation is effectively a franchise operation. The key driver behind that really being the dwelling business, delivering the services to enable those businesses. So I'm going to talk through each of these two things separately.
Firstly, focus on the brand and the customer experience and then I'll come back and talk a little bit more about how the model actually works. As Robert mentioned, our focus is the frugal space. It's about meeting the emotional, functional and technical needs of that of those particular segments. And we started out by saying, this is what we want to do. Yes, we need to be low cost.
Yes, we are appealing to a price sensitive consumer group, but that's not all they're looking for. If you think about the way that the millennial mindset works, they're looking for more experience based travel. They're looking for things that are fun and cool, simple, things that take work away from the consumer and make life easy for them. And so the way that we build the customer experience is very much tailored to those specific requirements. And it takes advantage of some changes, some macro trends that we've seen developing over the last 10 to 15 years.
Historically, you think about low cost was considered cheap, a little bit nasty, sort of the historic Ryanair perspective where we fly them because we're cheap, but we don't really like them at the time that we're doing it. Compared to premium brands, which were always expensive and always delivered a sense of luxury and a sense of being special and a bit of a cache if you could afford to be part of their customer group. It was quite a 2 dimensional approach, but what we see now is something which introduced as a 3rd dimension. We're seeing brands which are very, very specifically targeted to their consumers which deliver at a very low cost certain elements of a premium experience and one of my favorites is Citizen M, the hotel business. When you experience Citizen M, it's every element of the experience is completely aligned with their brand.
It's a low human touch business. You check-in yourself, you check out yourself. You can experience the entire product without talking to another human being. And when you go into the rooms, the rooms are beautifully appointed, very comfortable, but incredibly small, but really, really well designed. And so it is a brand which is set up for a very specific purpose.
We see the same thing with a brand like Muji, Japanese sort of convenience small travel goods and specialist clothing. Great design done at a very, very low cost, delivering great value to the consumer. And we combine that with the macro trends of, as I mentioned in the JetStar Corner's case, squeezing the middle market. And so this polarization between the low cost end and the price sensitive end versus the premium experience. This trade off in getting rid of cheap, but actually introducing value as a concept and then the valuing of experience over position, you start to then come to what we do with the Level brand, which is standing up for people's right to fly and opening up access to experience the world.
And so it is a brand which is very much tailored to that millennial mindset. As Robert mentioned, we've actually been doing for a 15 month old brand, we're actually doing extremely well in getting the message out about what we stand for and what you can expect from level. When we look at the top, we're looking at the French market. The bottom chart talks about how we're playing in the Spanish market. What you see is that in terms of lowest cost, we're performing very, very well.
We're also signifying quite strongly on that frugal element. Frugal in this context meaning really it's a lack of waste. It is getting exactly what I need and want at the lowest possible cost. It's not about just cheap. There is an element to it of meeting the sets of needs which are required.
We still have some work to do on fun and modern, and I think that's really something that's going to have to come through in terms of the experience of the brand. And there's still work that we have to do on board the aircraft to fully embody those elements of our travel experience, but we're starting off on that journey today. And you see some examples of how the advertising plays very much and there's a great sense of energy, a great sense of enjoyment, great sense of fun, which comes through in the way that we advertise with a very, very heavy focus on digital. So if you think about the customer experience then and how the customer experience differentiates between Level, perhaps a more traditional airline. The first element of that is that easy and economical element which we really achieved by delivering the service digitally.
And that's digital involvement in the customer experience, not just through the booking process, which is quite standard and well accepted right across the industry, but also introducing the digital element into the travel experience, the post travel experience, so that the customer is fully engaged with us digitally across the travel lifecycle. We talk about modern and unique and this whole element of the way that we deliver the service is enabled by the technology. When we talk about introducing technology, it's not about taking people out of the loop. You can't fly an aircraft without having cabin crew on board. But it's really about freeing those people up to express their personality to the customer and to make it a very human experience.
The technology is an enabler, not just a replacement. And then I'll talk more about what's entertaining and cool about the experience and people might be familiar with this from Virgin America, they had the same concept, but as part of the merger they've actually lost their ability to do this. But this whole new travel experience by putting the onboard product in the hands of the customer and allowing them to choose how they want it delivered. And that's another example, another element inside the Level business which can only really happen inside IAG. Because the dot air retail portal which is a product created by IAG Connect, one of the IAG Group businesses enables us to deliver a new type of experience onboard the aircraft.
It's based on the seatback screen. Using the seatback screen, the customers can shop for the products that they want onboard, compare their telephone to enable them to pay directly from their phone through the seatback video and have the product delivered to their seats. Now we're the launch customer for the shopping elements of Dot Air and so we're still going through evolution of that product to get it fully where it's going. But the latest version of the software was trialed on one of our aircraft about 2 weeks ago. And during the trial, what we found was 4 of the crew were on rest at any particular point in time.
The other 4 crew members were always, always visible in the cabin. Because what happens when you start with this sort of model? One customer and it only takes 1, decides that they want a Coke and a bag of chips during the middle of a long haul flight. They go to their screen, they order the product and the cabin crew member comes and delivers the product directly to the seat. Well, the person sitting next to that customer suddenly looks at them and says, hang on a second, I'm actually feeling that I could probably do something too.
So they make an order. Now you've got 2 people next to each other who have both experienced product and everybody else around them starts to do the same thing. So for the entire flight, 4 cabin crew members were backwards and forwards between the galley and customers and what we saw on that flight was a significant increase in ancillary sales, driven not by a change in product, purely by a change in the way that we relate to the consumer and the way that the consumer can control their own purchasing behavior. And when you think about a traditional travel experience, you get your meal service at the start, the cabin is dark and nothing happens and you don't really see anybody for several hours before the next time that they come into the cabin to deliver food, drinks or any other product. This completely changes the dynamic of the way that people travel and the way that they enjoy the travel experience.
So ancillary is a huge opportunity for Level and I think more broadly for the global airline business. And it's one thing to talk about ancillary for short haul low cost carriers and we all know that that's been a huge driver of their profitability over the last 10 to 15 years. It's a very, very different thing when you're talking about a 10, 11 hour flight. You have a lot more time with the consumer, you have a lot more opportunity to sell into them on these long haul flights than you would on short haul sectors. So from where we are today, we're expecting to see roughly a 3 times increase in the ancillary VIPACs with the full deployment of our model.
And the full deployment of the model really does require having the probably quite traditional product groupings, but delivering those with dynamic pricing and artificial intelligence. And I certainly wouldn't be standing here telling you that we've already mastered this. We have a long way to go, but what we do have is IAG's digital capability, we have IAG Connect, we have Hanger 51. All of these group investments in technology are all able to be funneled into Level to help us to advance much more rapidly and to deliver really innovative solutions to our consumers. I also want to talk a little bit though about the basic ethos because at its heart, Level is really focused around that low cost, long haul segment.
And I really love the way that the team has already taken what we started with and has moved that to the next level. Great example being the new catering proposition, we've reduced 50% the plastic, single use plastic that we use and we've done, we've moved to fresh products at the same cost as we have frozen products. So increasing the quality of the customer proposition while reducing waste. Our new onboard product, which is the blankets, the pillows, the earbuds, amenity kit, etcetera, the new product that we have is significantly better than the original product at an 8% reduction in cost. So continuing to reduce the costs while driving improved customer value.
Same thing in terms of our uniform and the service style, the new uniform that we introduced with the Paris launch, 15% lower cost than what we had for the Barcelona launch. We're just in the process now of rolling that new uniform back into the Spanish operation. And continuous improvement in the portal, pay and pay. We've now got single click purchasing enabled, which in my mind from an e commerce perspective as a consumer of e commerce, single click purchase is really the absolute goal in terms of how you want to be able to relate to the consumer. So we've turned on single click purchase now to make the checkout process easier.
So shifting gears a little bit, I want to talk now about the business model that sits behind Level. When I talk to consumers, what they're really interested in is the customer experience and how they relate to it. But it's really important, I think, from an investment perspective to understand the mechanics that sit behind this business. And so instead of a vertical chain, when you think about level as an organization, you have the customer at the center and surrounded by what we call the airline management company, the Level AMC. So the ownership of the customer experience sits with the airline management company and that's our reason for being.
We own the brand, we own the customer experience, the distribution, the pricing, the revenue management, how that business actually structures. And then around the outside of the AMC are the production units. As a very, very clear distinction now between producing the airline seats and the way that we interact with and relate to the level consumer. And it's all about if you think about the corollary, this is the same model which is being used to disrupt a number of other vertically integrated industries. And I think one of the best examples I think of the way that we work is really the Amazon model, where each of the separate elements of that business is completely modular.
Little France at the moment flies the operations out of Orly to Montreal, Newark, Port au France and Pointe A Pit in the French Caribbean. But there's nothing that prevents me from utilizing an aircraft out of the Spanish operation to fly routes out of France. If I can't deliver the right cost base in the French operation, the other production units can take over that production and we can deploy the aircraft to different ways to ensure that at every point in time we have the lowest cost of production. Now that's something which is much more difficult to do in a single large airline where the cost base is structured around a vertically integrated chain. So from a level AMC, airline management company perspective, I'm relatively agnostic as to the form of the underlying production model.
And if I talk about those in a little bit more detail, 15 months in, we already have 3 distinctly different production models already in operation today. The Spanish operation is effectively what we would call a subcontractor 3rd party model, where another airline under their own AOC is operating that business for us. It's a fantastically structured business. It delivers fantastic benefits to Level in terms of its cost base and is also delivering benefits to Iberia in terms of allowing them to deploy their pilots in a new way and lower the overall cost for their own operation. So it's a really, really competitive cost base delivered by cooperation between different parts of the ING Group.
We have a directly held subsidiary. This is more a traditional model, but because I'm mixing that traditional production unit with non traditional production units, it gives me the ability to introduce competition into our organization and prevent us from stagnating in terms of our cost base. And then the 3rd element, Anaszek, which is another member of the IAG Group, is a franchisee of Level. So in this case we're utilizing dwelling's short haul capability and their cost base to be able to mount an operation in Austria at an extremely low cost. But utilizing the Level brand because the Level brand is specifically designed on a pan European basis to deliver to that frugal segment.
So the product mix and the way that we structure it is very level, but the back end of the engine is very much welling tied together through the Aniseq vessel. And so the other great advantage of having this type of production structure is it's almost infinitely scalable. And it's equally not tied to the historical structures that are put in place by bilateral relations between governments that set out how traffic rights work. Because the ownership of each of the underlying vehicles can be completely different. And so it doesn't matter that Level is not an African entity.
If we chose to work with an African production unit, we could access African traffic rights in exactly the same way. So not only do we have a broad number of units, each of which can grow a small amount at the same time, but we have the ability to grow the number of production units, creating a more highly rapidly scalable solution. I want to go back and just think about some of the success factors that we already know about low cost long haul. People actually ask me, they say, well, your job is to prove the low cost long haul business. I say, no, actually it's not.
My job is not to prove a model. My job is to make level highly profitable. The model we already know works in certain circumstances. The important thing is to avoid doing the things that break the model. Most important thing is maintaining a maniacal focus on who your core customer segment is and on the cost base because there is a really important difference between a low cost carrier and a low fares carrier.
If you're a low fares carrier with a high cost base, you just put yourself out of business. Our low costs are there to enable us to provide low fares to the consumer. It's not the other way around. And this is a vehicle for growth. But if we don't keep the cost base right, if we don't keep our focus on that frugal consumer pretend to be something that we're not, none of the rest of these things on this list will matter.
2nd, focus on delivering value to the consumer. It's not about being cheap, it's not about that negative connotation of the word. It's about allowing the customers to believe that they've had a fantastic deal, that they love the experience because they have achieved something which they wanted to achieve. Invest in technology to lower the costs and to improve the customer experience. But at the same time, we need to make sure that we access traditional distribution and we need to partner with other airlines to provide feed into the long haul sector.
The history of long haul is littered with the carcasses of airlines that did not understand the importance of that short haul feed onto long haul segments. And being part of the group, we get access to the distribution capability of all of our sister Opcos and the feed from them as well, which gives us a specific advantage. Being part of IAG has allowed Level to become what it is. And I firmly believe that if I was not here as part of IAG that this what we are doing with Level would not be possible. The speed with which this business has been established and brought up to scale could not have been achieved without the support of our sister Opcos.
My team at the moment is made up of 13 secondes from other parts of the business, pretty much all parts of the business, who have been released from their roles in other companies to help support us and get this business moving really, really quickly. The connections with Iberia with Welling, the product IT department providing our website and that support, we're able to tie into each of those different parts of the business and be able to access services at scale even though we're a very small business. And that's almost impossible for somebody who's sitting outside of a very large group. But equally, even if you're sitting in a very large group, this is the one large airline group where you have what Willie was talking about earlier, that parental independence, that neutrality. And I'm absolutely given the freedom to do what is necessary to turn this business into a profitable business, which I know from talking to other colleagues in other groups has not been the case in other groups.
So IAG is particularly special. But we do have to make sure that we avoid what I call legacy contagion where we catch a cold by association and we build into our model some of those legacy elements that prevent us in the long term from being truly low cost and truly dynamic. And then I come back though to the core point, which is about customer segment and cost base. That's the heart and the soul of what we do is maintaining that initial base. I'll talk mainly about the long haul.
So just a little bit of a stop in Vienna to talk about the short haul business. Already serving 14 destinations out of Vienna, it's only 3 months into operation. The 4 aircraft at the moment A321 Classics growing to 7 aircraft next year, I think A320s and then significant growth beyond. The Austrian operation is a pure low cost short haul business. And even as we grow the long haul business and the way that we interact with the customer for long haul, what we recognize is the short haul business will not be the same as the long haul business in terms of its customer experience.
It has to be specifically tailored to meet what is level on one hand, but also what is the lowest cost service and what are the customers for that short haul segment really wants. And so it's tying those two things together which makes it particularly clever. And so rapid growth in this business and it has great potential for further scalability across Europe as we go forward. So as I summarize, this is a phrase I use a lot with my team, designed for success. What it talks about is, if you put the right people, the right processes, the right understanding, the right technology together, you will generate the right results.
If you don't have all of the right elements put together, then you will not deliver the right results, but it is completely predictable that you will not deliver the right result. So we have to get the foundations for Level right before we start to scale up the business. But we've got the right elements in terms of the brand that we have built and the brand awareness and I'd point out that a recent design blog, quite an influential design blog has just awarded level on it put a level on this list of the top 6 iconic airline brands of all time. That's an amazing achievement for a 15 month old brand alongside not new brands, but the 1967 American Airlines AA logo with the flying eagle, the Qantas flying kangaroo, the KLM crown. It's talking about the design elements and the way that the brand is designed.
The combination of earth and sky built into that. But then the concept of taking flying to a new level, level flying stability, It has a whole bunch of attributes built into this design which are incredibly clever. But by designing the brand in the right way, what we do is make it easy for that brand to then appeal to and speak to our consumers. We've got functional products that are delivered in a creative, cool and modern way, and we've got personal service, which is delivered by utilizing technology to streamline the way that we conduct the operation. We've got best in class costs.
We're using efficient technology. And then that secret ingredient, the fact that we are sitting underneath IAG, leveraging the scale and the benefits of our sister Opcos to deliver the lowest possible cost. And when you put these 6 elements together, this is really what creates the future success for Level. And boy, what a success it's going to be. So we have 14 aircraft in 2019.
We have aspirational targets to grow to about 42 aircraft by 2023 and undisclosed aspirational targets which have us becoming even bigger than that. The split for next year, you see we continue to grow in all of our bases. We're growing 1 aircraft in Barcelona, 1 aircraft in Paris and another 3 aircraft in the Vienna operation. That's a moderate level of growth over the next 12 months, but it really is a moderate level of growth to allow us time to fine tune the level model to get the foundations for this business right, which will enable us to scale very, very quickly in a profitable to profitable growth. I've got a few things I've got to do as the new CEO.
Very much now is the time for us to transition from that project mode into an ongoing operation. As I said, building out those foundations, standardizing a common product and a common experience, common distribution channels, common website across all of our business units. And then developing the case for investment to convince my masters to give me a little bit more money to actually go out and really grow this business very, very quickly, as well as working across the group with each of our different partners to really develop a technology platform which will enable us to take Level from being just another airline to being something really truly special in the global industry. So that's all from me. And without further ado, I realize I'm taking time, pass it over to Javier Sanchez Prieto, CEO and Chairman of Welling.
Thank you, Vincent. Sharp and Thijn. Good morning, everyone. During the next 20 minutes, I would like to share with you how we deliver on regarding the plans we presented last year and also outlined what are the main strategic lines of action for welling going forward. So, the main three elements of this presentation and the boiling plants, it's well, first of all, our strategy remains unchanged.
So, we continue trying to develop our customer strategy. We continue to reinforce our operations. We continue fostering our plans like we described last year. 2nd is that we face significant and material headwinds while developing our plans, specifically the ATC state, it's far from ideal. That's we'll come back to this in a minute.
But also some of our input costs, as you all know, has significantly changed like the fuel price and also the dollar in our case affecting some of our input costs. So what are we doing in that regard? Well, first, we are fostering our customer plans and our brand deficit in the marketplace. So we can maintain healthy revenues. 2nd, we are building resilience into our operations.
It's we're investing into our operations. It's an investment that pays off in terms of cost. And the third thing that we're doing is that we are reducing our short term growth, although maintaining our long term ambition, we are reducing the growth for 2019 and we are also fostering a better use of our capital. So we are increasing the gauge of the planes in our plan, so we can have a better use of our employed capital. So let's just start with the first piece.
The first piece is about the how we're delivering regarding our plans. The first thing is about the network, where to compete and we have here some examples of how Wellin is competing better and better in the different markets and we are how are we gaining market relevance and how do we continue with our market expansion. You can see here in Barcelona, Barcelona is not only just that from 2016 to 2018, we have increased our share. It's our capacity share in this case. It is also that if you look at the last 10 years, well, it has been, let's say, a major catalyst of the development of the city and the development of the airport.
The same applies to Spain and the domestic traffic. We are now the leaders in the domestic traffic, specifically in the traffic between the Peninsula and Balearics and Canaries, the two main focus of tourism for Spain. We are also continues to fortify our flows to France and to Italy. So and the good news is that we still see strong opportunities to continue developing our model in different cities and in different markets. So this is the where to compete.
How are we competing? How are we developing our network? Well, it's 2 fold. First of all, we're trying to be very efficient. I mean, if we look at our seasonality, utilization, all this stuff, I mean, we're continuing to improve this.
I mean, we are reducing seasonality, we are increasing utilization. So that's good news because we can work better together, we can reduce costs. But the second thing is we are trying to have and to do a better use of our capital. So when we look also at our fleet plans, we are proposing to have less planes that the ships growth that we are doing. And the second thing is I just mentioned, we are increasing the gauge of the planes in our plants, not only because of the cost and the capital efficient, also because it is good for the markets we operate and also it is good for an environment that is really congested.
So this is how we compete in. And here we have EBITDA the details on well, what is our plans. This is the 10.4% that was expected for 2019 is now a 7.4% down 3 points. Although again, we maintain our ambition for our long term plan, but we understand that this is the kind of well capacity discipline that we need to put in place going forward in the phase of the in the light of the new fuel price and the way we are competing in the marketplace. This means that next year we're going to have like 4 less planes than we were expecting.
But again, we maintain flexibility. We maintain flexibility to reduce further if that is needed or to grow faster if we see opportunities to grow the business in the again in an efficient and a profitable way. So, as I mentioned, there has been a couple of main headwinds and I'd like to focus now not in the field, we I'm pretty sure you know all the stuff better than me about the field evolution, but yes in the ATC and the state and the situation of the APC. When you look at Europe, the situation is really bad and we'll come back to this chart in a minute. But when you look at sort of the position of well in in Barcelona, Barcelona and Whelan is heavily affected by Marcell and one of the worst performance in the as in a air traffic control unit together with Karlsruhe in Germany.
So when we look at the evolution and we have here the minutes of delay caused by ATC during the summer. I mean, this has been dramatically changing over the years. I mean, you see that this is the increase of the delays has been like 29% year over year. And when we look specifically to the last year to 20 19 to 20 18, this has been 79%. Considering our, again, geographical position, this has been even worse than the average for Boeing.
And I mean, on the way that I mean, it is very clear to me, we have the airport running at full capacity. I mean, they don't have headroom. Then we have the air traffic control units running below capacity. So all the buffers and all the investment has to be made by the airlines and that's what we are all doing. We are investing in building on the resilience and trying to deliver and to better service and to mitigate the effects of these in the to our consumers, to our customers.
Of course, we are working with that because this situation is unacceptable. I mean, we are working with that at different levels. I mean, as IAG, with the association certainly for Europe, we're working with the commission, we're working with the government, because the situation needs to stop, needs to be reverted. We're pretty confident that this situation will take some time, but this situation will be reverted. So we are all and specifically well in making an investment here because this will pay off, but in the future that situation will be much better.
And unfortunately, it's not only Barcelona or only welling. We have here the top 25 airports in Europe. It's we have in this access the capacity and the colors is the performance. It is a pity that we don't have any green in the top 25. We have the dark gray, the dark solid red.
We have Frankfurt, Charles de Gaulle, Barcelona, Parma de Mallorca, they're all slightly below 70. We have patients like Lisbon below 50 or Sunset below 40. These are the dark ones. But the light red, they're not much better. I mean, we have a lot of Gatwick, Fumicino that are slightly above, I mean, the 62, 63, I mean, the average is 63 for the top 50 airports in Europe.
It's just 7 points down next year last year, sorry. So, still a lot going on in this area. Just to highlight, I mean, we are preparing the airline to perform in this environment. What are we doing then? What are our plans?
As I just mentioned, first thing is building resilience, better operations, better cost. 2nd, it's customer. We foster the plan to improve our position and to deliver the best customer experience to our customers and then third capital efficiency. So we have here some examples of what we are doing in the different areas. For instance, in the network, Well, we are redefining our base our basis, sorry.
We are also trying to isolate those regions where we can face more ATC problems. And of course, we continue with the market there and best of breath and building relevance in the market because this is good for consumers, but it is also good for operability because you have more options to recover your operations in the case you're facing a distraction. In the airport, we continue working in automation of the processes, the new boarding group and the queues that's working very nicely, specifically in Barcelona. It's very good the work that the team has done in that regard. And I think that our challenge here is consistency.
I mean, we are operating in more than 130 different destinations, for instance, from Barcelona. So, consistency is one of the challenges that we are working very specifically. So then the in flight service, in flight service, well, the cabins, there's a lot of going on around the cabins. There is a full retrofit of the cabin with the new Schlene seats, with Wi Fi. But not only that, we are launched a program to refresh our cabins and to clean to have it between other cabins more frequently.
And the second aspect is our crew. I mean, our crew is one of the most valuable assets of Wharton nowadays. When you look at the breakdown of our NPS when you look at the different points that we have in the different touch points, that's one of the best and we will like to maintain that and not only maintain that to improve in that area. And unfortunately, we're working a lot on disruption and customer care because when you have a problem, the customer, I mean, they want us to react and to give them the best out of our resources. So we have improved a lot the call center and the customer center.
I mean, it's very good now. It's over 95% level of attention. If you have any query, any claim with Boeing, our average resolution time is below 2 days. Of course, you will find people waiting a lot, but not everybody is entitled for what they're claiming. We've launched the self management direction tools, I mean also very quickly, very good, we'll come back to this later.
But in digital, I think that we're making good progress. We continue making good progress. So just to give you this example, when in March, we were suffering like a weekly strike in March sale. We decided to launch a self management tool in the app. The guys developed that in a couple of weeks.
We launched this and the following week when we faced the new strike, we were able to manage 40%. Well, we the customers were able to self manage 40% of the changes, refunds via the app. So it's a pity that we need to work on that, but at least we can respond and we can offer options to our customers. This is an example and a specific example, I think it's we selected that because it's along the lines with Robert and Vincent were saying about how can the different brands and the different airlines be focused on the different segments. And one of the things that we did, we decided a year ago and we have already done is that we discontinue our excellence.
Agora Excellence was one of our first because this was a traded fair that was focused in the kind of business. So we decided to discontinue that because that's not our focus and we've launched new first families. Specifically, we bundle a couple of those for what we call TimeFlex and Family, well Family Services Planatories for families and TimeFlex is a very interesting one because this is for business passengers, business purpose passengers, but flying in the rear cabin. So business on a budget in the terminology that Robert has used. So you have here the main
things that our customers
are asking for. So basically, flexibility, priority boarding, priority One of the most value characteristics is, one of the most value characteristics of our planes and where our consumers our customers are looking for is the space. So this can foster the ancillaries. And I have to say that we launched this like 2 months ago and the results so far are very promising in terms of the pickup of the sales in both assets. And then digital, I mean like last year, I mean, boiling is a digital element.
So we continue working a lot. And I have to say that, that digital somehow underpinned all the trans underpins all the transformation of Whelan. So we have different examples of what are we doing. For instance, with the customer, I would highlight that we are working with we tend to be where our customers are. And so for instance, we're working with WhatsApp it's the most common messaging tool in Spain.
So we're working with Facebook. They launched a beta product. So we are having our relationship with the customers via WhatsApp. And we launched also this week, very recently, Vueling is in Alexa in Amazon. So you can ask for the flight situation or you can still you cannot make changes or make a reservation, but this first test is running very nicely.
And in the marketplace, in the e commerce, we continue working on that. I would highlight here that we've been able using artificial intelligence to understand better the demand. So we can adapt our ancillaries better to the demand. And it's not only that we can increase prices, it's sometimes it's the other way around. I mean, we can offer better prices and so we can increase the reach of our ancillaries for instance, offering bags or things like that.
That. We're using this also digital a lot in operations. So we have developed ATC forecast models, so we can adapt better our operations and our extra resources in the light of what we can anticipate as ATC distractions. As I told you, the customer self-service bar also some models like fleet analytics, where we are, I mean, it's not rocket science, but we're trying to predict maintenance, so we can to reduce the fuel consumption using data. Something that it's very clear is the digital mindset.
I mean, changing the whole company, thinking digital, I think it's very clear. 1 of the most ambitious projects that we have has a low cost is that we are connecting the aircraft and connecting the crews to the office. So we can't have real access to the performance and we can react in an automatic way to the things that we are doing or the situation that we are facing in any moment. And yes, we are at Wheeling, we continue supporting the IAG strategy and the IAG objectives And well, in terms of our objectives, our EBIT continue being sustained, sustained results in terms of EBIT and in terms of ROIC close to the targets, the long term targets now and we'll hit the targets over the period of the business plan in terms of ROIC. Again, previously saying similar growth than last year with flexibility to reduce the growth further if we need to apply this capacity discipline depending on the circumstances to grow faster if that is needed.
And also the fleet, it's somehow in the number of planes, you will see some reduction because we are increasing the gauge of the planes that we're using. I will highlight to the point of Vincent before that we are also trying to help and trying to develop the IAG strategy and trying to help the different OPOs in the areas where we can be of some help like digital or for instance helping launching level in Vienna where we will put in place an AOC in record time in 3 months. So that's I think it's also good news and we're accretive to the team that was leading that part. And I think that the most important message for me today and in front of these results is that the team and you have part of the team over there, Welling is fully committed to deliver on those targets and also, of course, fully committed to deliver on our promises to our customers. So it's a pleasure to hand over now to Stephen.
The flourish is yours and well, good luck in your last.
Thank you, Javier. Good morning, ladies and gentlemen. What I'd like to present today is an investment case for growth justified by best of class return on invested capital performance, a compelling competitive position and above all else demand led market opportunity. I hope you're familiar with this, because it has been consistently delivered at Capital Markets since we were acquired by IAG. Our mission simply is to be the leading value carrier across the North Atlantic, enabled by a profitable and sustainable short haul network.
We have today a profitable, sustainable and investable short haul network independently profitable. All of that supported by a guest focus, a brand and digitally enabled value proposition, delivering above average returns on invested capital to yourselves or IAG shareholders. It is a demand led proposition with value centered on cost, products and service with an operating model and hopefully a presentation today that is simple by design. We believe it's been a virtuous model and that we've built a compelling competitive position. We start with cost.
When we succeed in reducing cost, we invest in growth. That growth is enabled by price competitiveness. We drive margin and we deliver return on invested capital. At the heart of that virtuous circle is NPS. We are a guest focused business and that NPS standout that creates our opportunity.
Since acquisition by IAG, we've had the support of the IAG Board to leverage our ambition. And I think the numbers that you'll see will give you confidence in our ability to continue to leverage that ambition. We've reduced non fuel unit cost by 18% at constant currency since quarter 3, 2015. We've grown
by 33%.
We've created value for our guests by reducing RASK by 9%. We've shared that value with shareholders by doubling our operating margin to 18%. And since IAG has acquired Aer Lingus, our return on invested capital has doubled to 28%. By any measure that represents significant accretive shareholder
value.
We are delivering leading financial performance sustained by the successful execution of our value model. We've added close to €500,000,000 in revenue and we will exceed €2,000,000,000 top line in 2018. A lot of that incremental revenue has been captured as operating profit. We have sustained an increase in our lease adjusted operating margin, which has flowed directly through to return on invested capital as we manage an efficient capital base. The 28% is slightly flattered because of a low level of heavy check maintenance in 2018.
But nonetheless, the underlying levels are well in excess of our targeted 15%, consistent with what's been delivered over the last 3 years and we believe is sustainable into the future. That sustainability stems from a confidence that we have competitive advantage as a value carrier. We are better positioned and better equipped to succeed than any of the competition. We have the financial strength not just of the support of the IG Group, but in terms of our operating performance, our balance sheet, our equity free cash flow, our dollar hedge position given our point of sale relevance in North America, all sets us apart from the immediate competition. We also have a balanced contribution across all of our operations.
We have no cross subsidization between our networks or on our aircraft. Our business cabin delivers high levels of return on invested capital as does our economy cabin, as does our cargo hold. We have a network which is far superior both in terms of internal feed from Aer Lingus short haul to long haul, but also in the quality of our partners. We have a long standing relationship with JetBlue in North America, which both leverages the commonality of our business models, but also takes full advantage of our co location in JetBlue terminals in Boston and JFK enabled by the pre clearance of immigration and customs in Dublin. We also have this year initiated a new relationship with Alaskan Airlines.
Again, very sympathetic in terms of business model and we're seeing tremendous results along the West Coast, Seattle, San Francisco, and Los Angeles. We also then have the support of British Airways in terms of the power of the BA code across the Atlantic, particularly in Source Market U. K. We have an established North American presence. Our largest point of sale is in North America.
We have 34,000,000 self identified Irish American citizens. We have some of the highest levels of reciprocal FDI between Ireland and North America. We have a legacy of operations in North America since 1958. And we serve primary airports in 2018, 2013 in 2019, 2015 and we have the confidence that all of those sustain not just the existing levels of operation, but increasingly provide opportunity for growth. We are very focused in how we manage our capital and we are very focused on how we deliver value to our guests.
Net Promoter Score, as I said, is at the heart of our business model. But we are conscious that to adhere to our value principles that any investments needs to be guided and needs to actually add value. So we have a range of initiatives across all touch points with our customers. But we attempt to focus on those investments that actually create value for our guests. There are many things that airlines do, some do well, some not so well that are relevant in driving Net Promoter Score.
We survey, we canvas, we get feedback to establish what's relevant to our guests and with focused continuous low levels of investment, we drive NPS. And we drive industry leading levels of NPS. The last 12 months on a rolling basis, our NPS is at 47 points. We've received the external validation with SkyTrax 4 star ranking and APAC's 5 star ranking. At the heart of our NPS performance is our operational and on time performance.
We are best of breed at the Dublin campus by some distance. NPS driven investments are delivering brand preference. In the home market of Ireland, we have a 75% brand preference relative to the always getting better direct competition. We want to replicate that level of success across all of the markets we serve. So we will be making targeted investments across major guests and brand point brand touch points.
We will be launching a new branded entity in the Q1. That is to reflect the airline we've become, the value proposition that we offer, but remaining faithful to the brand heritage and a legacy of 82 years of successful operations serving Ireland. We'll introduce new uniform. We'll make significant increases in investment in brand spend in North America. That investment is on the basis of allowing us in the first instance to increase revenue share and over time as we continue to grow to increase market share.
We'll be making product changes, complementary alcohol during dining, a new free social media Wi Fi package for all guests traveling in the economy cabin. We'll also change some of the service processes as new aircraft join the fleet and as we learn from the experience of other OpCos in this instance level. We continue to invest in mobile web and airlinks.com technology because we have the ambition to be 85% direct in everything we sell, not only because of the obvious cost advantages, but also because it allows us to personalize the relationship with our guests and ultimately upsell. We will fully deliver with a pay with Avios function to our Air Club loyalty program. We will introduce airspace, which is a differentiated product on our short haul, and we will invest in self-service technology in areas such as baggage tracking.
All of this gives us the confidence to continue to successfully and profitably grow our business. Our short haul business will grow with the market, low single digits of seat capacity growth and can be flexed up or down in the context of changing cost or demand conditions. But we continue to have confidence based on a track record, based on our capabilities to grow our North Atlantic operations. That growth will increase network connectivity. The hub at Dublin works.
We have achieved critical mass. The risk going forward is lower than the risk that lies behind us. 63% of the ASK growth will be in established markets through scheduled debt, markets that we are already familiar with, markets that we understand the dynamic and markets that we have an element of certainty with regards to revenue performance and that will be achieved through seat capacity or frequency increases. The balance of ASK growth is in new markets. These are substantial demand led opportunities.
And the new technology long range 321LR unlocks new city pair opportunities not uniquely for Aer Lingus, but it is as close to unique as exists today. We continue to develop an improved revenue management capability. We will be introducing new point of sale revenue management tools in order to better manage the geographies and the networks that we serve. The fleet investments we will be making will increase the relative business cabin capacity. Business cabin has been extremely successful for Aer Lingus in recent years.
The product that we have put into the marketplace is very well accepted, is very competitive and NPS achieves our average scores in the range of 40 to 50. We have a load factor opportunity as we continue to combine networks. We continue to have capacity particularly in off peak that we can utilize at very low marginal cost. And that volume will create the opportunity for us to continue with our very successful retail model. All of that is underpinned by an acceleration in our fleet growth.
Fleet as in our business is simple by design. We will be introducing 3 incremental wide bodies bringing the total to 16 A330s. We will be introducing 10 incremental narrow bodies bringing the total to 14 A321 L Ores and we continue to review the opportunities that the potential XLR will bring over time. This growth is CASK efficient growth. We will increase the average gauge.
The A330 platform will transition to the 300 rather than the 200. In Erlingus operation that is effectively 50 incremental seats at close to 0 incremental cost. New engine technology of the LRs will protect us and insulate from the worst of fuel cost increases, particularly at the replacing in the first instance Boeing 757 technology. And with both of the A330 as it flies increasingly to the Midwest and West Coast where simple sector length will drive utilization And more importantly with the LOR, which when it has done a North Atlantic crossing will continue through Dublin and serve our European network. We believe that we have found a mechanism where this investment not only increases block hour utilization, value to customers in terms of product, but also allows us the capability with confidence to invest while at the same time reducing unit cost.
All of this will be enabled by investments made at Dublin, which is increasingly becoming a congested facility, but there's now alignment not only at the level of opportunity that exists for Arlingus to grow Dublin as a hub, but for the economic benefits for all stakeholders in Ireland. The new Northern runway is on track for launch and completion in the early part of the next decade and a further $1,700,000,000 of infrastructure has been proposed by the DAA through 2020 and 2024. From an Aer Lingus perspective, an important element of that infrastructure is the development of a Pier 5, which is off of Terminal 2 in Dublin, which creates the ability for us to continue to grow our hub, but to do so in a very efficient manner, not just from a ground handling perspective where all of our gates are proximate, but also from a guest perspective where the transfer experience will be smooth, convenient and won't in any way lose the time advantages that are inherent in using Dublin as a gateway between Europe and North America. We have alignment of all stakeholders. We commissioned a report from who estimated the benefit to Ireland of that investment to be close to $18,600,000,000 in GDP across the Irish economy, driving upwards of 36,000 direct jobs across the regions as tourists flow through the island of Ireland.
So we believe we have a compelling proposition for you. Our plans are to maintain above target least adjusted operating margin. You will have seen from our track record in terms of ROIC that we have the confidence to commit to well above IAG target return on invested capital through the cycle. We have managed growth above and beyond what is targeted over the next 5 years in the last 5. As I said, we are confident that the growth going forward represents less risk, still challenging, but it is a profitable growth opportunity which will drive and create shareholder value.
So ladies and gentlemen, I believe we have a compelling case, a leadership team with a proven track record and I look forward to in a different role watching Aer Lingus progress over the next 5 year period. Thank you all.
Well done, Stephen. Thanks very much for that. And good luck with your future endeavors. And I'm really glad you're staying on the Aer Lingus Board so we can benefit from your insights. Not only has Aer Lingus regularly topped the ROIC and net promoter scores within IAG, but Stephen has routinely over the last 3 years topped the speaker feedback rankings at Capital Markets Day.
So maybe that will continue for today. We'll now have a coffee break. As Robert mentioned, in the foyer to the left, there are 4 stands with examples of our Hangar 51 projects. I'll name them for you. There's a group called Valentio from Atlanta, Georgia.
They're developing artificial intelligence capabilities to optimize revenue post booking. There's EMU Analytics, which is a geolocational big data platform. And then as I think I pronounced this probably wrongly, Monaise, which is a U. K.-based challenger bank working with Avios to allow travelers to manage their finances when they're traveling. And then there's Syravia, which is working with IAG to translate inventory onto tokens that can be stored and exchanged on blockchain.
So we've got 30 minutes. Please be back here at 11:40 and I'll see you then. Can people take their seats quickly? We're now moving on to the next set of airlines, British Airways Iberia, British Airways and IAG Digital and IAG Cargo. Before we get going, can I make an announcement about, if you do want to leave the room during the presentation, can you please use this far door on the left here?
And that's the quietest door. Unfortunately, if you use that door on the right, which says do not use this door, use another door, that sets off the other 2 doors as well and makes quite noisy. And if you do need to go, come in and can you just shut the door quietly? Thank you very much. I'll now hand over to Luis Gallego, Chief Executive of Iberia.
Thank you, Andrew. Good morning, everyone. Let's talk now about Iberia. In the Capital Markets Day of November of 20 12, Iberia announced a profound transformation plan for the company. The plan was a tough plan because it was a very difficult situation what we had in EBITDA.
After remediation and after 1 year of with all the colleagues of the company, we closed an agreement. And at that moment, we decided to launch what we call the Plan de Futuro, a plan precisely for that to give a future to the company. The plan has had 2 phases until now. The Phase 1 is a phase that we have called the Phase 4 survival. And now we are in the 2nd phase that is the phase to move the company from survival to excellence.
Since the beginning, we have structured the plan in 5 pillars that you have there in the presentation. We are working in the revenues. For example, right now in the second phase, we have 21 initiatives, group in 6 projects. In the revenue management side, we are working in a new pricing approach with personalized pricing, also deal demand management tools, interactive cold share, multi pricing points. In the ancillaries, we are rethinking products and eliminating complexity.
In the digital and direct channel, we are delivering now the new platform and we are optimizing all the digital marketing performance. In the MDM, we launched in November of 2017 successfully the program and now we are developing the usage of that channel that is very important for us. In sales, we continue with the transformation to further centralization of global policies and strategies and practices also. And in the brand, we are building brand preference according to each market brand goals. If we look to the 2nd pillar, the CASK, the cost, we are working to have a more flexible and agile and simple company.
We are working now in labor agreements in the redundancy program. We work also with GBS with the procurement side in order to improve the contracts because in this second phase of the plan supplier costs are going to be key. And we are simplifying also the processes of the company in flight, but also on ground. We continue investing in our fleet with the renewal of the fleet, but also investing in the current fleet, investing in the network. We will see later what the plan that we have.
But also we are developing new alliances. In that particular case, we consider that the alliance with LATAM that Willie said before is going to be key. We are still analyzing the result of the analysis for the Chilean authorities, but for us, we are sure it's going to be key. And we have an airline, but we have other businesses. We have maintenance and we have airports.
And now both businesses are profitable, but we want them to be sustainable. And for example, in the airports area, we want to improve the productivity and we consider that the new technologies are going to be key for that because we have to take into consideration that we are in an environment where revenues have been decreasing for a long period of time. And in the maintenance, we work we continue with the transformation to try to achieve the IMS objectives that we have established. The IMS is a project that we have in the group for the maintenance to capture the synergies that we can have in a group and to provide to the operators the best in class cost that they deserve. So when we reach those objectives, we consider that Iberia can be a provider of preference for the group and also we consider that we can develop some of the 3rd parties activities that we perform.
In people and digital transformation, this is a part of the plan that is about the change of the culture of the company. We are working to have a digital company where customers and employees are always connected. So the plan is transforming Iberia and we have now a new Iberia. It's a new Iberia. If we look at the financial results, you see here that from losing around €1,000,000 per day in 2012.
Last year, we were earning more than €1,000,000 per day, a jump of more than €700,000,000 in EBIT. If we look at the ROIC, we achieved 12% in 2017 and we are in the path to rise to the 15% that has been established in the group. But this is also a new idea for the customer because operations, for example, we are doing very well. And in the year 2016 2017, Iberia was the most vulnerable airline in the world comparing with the network carriers. This is because we changed a lot of processes, but also is because of the commitment of the people that we have in the company.
This evolution of the punctuality plus all the actions we are doing in all the customer area has improved the NPS and we reached 30% in 2017. Also this transformation gave us the 4 star sky tracks that for us is a recognition of what we are doing in the company. And it's important, it's not in the slide, but it's also a new idea for employees because in 2012, we were talking about losing jobs. We were talking about survival, and now we are not talking about that. We are talking about development.
We are talking about possibilities of career. We are talking about new collective bargaining agreements that improve the conditions of the employees. So this is a new Iberia for everybody. After all this effort, this new Iberia has an important cost advantage if we compare with competitors. So we consider that if we leverage our best in class cost base, we can strengthen our positioning in our core markets and LatAm is one of the core markets that we have.
We want to invest there, but also looking to selected markets where we can deploy also our network. But in parallel, we are working, strengthening our commercial positioning and brand in LatAm. We have a customer plan. We will see later, but all the points in the customer journey. We are changing the company through the digitalization and we want to maintain the best in class operations and profitability.
If we look to the evolution look at the evolution of the cost, we see that in the period since 2013 until 2018, we have reduced 4% per year and we are going to continue reducing 1% per annum until 23. We have achieved this because of the plan, Plan de Futuro, I told you before. The plan both phases, the major part of the initiatives are related to cost, but in this second phase revenues are also key. To compare both plans, for example, in the first part of the plan, employee cost was 51% of the scope of the plan. Now it's only 15%.
Supplier cost, we have 11%. Now we are going to have 29%. And if we look to the weight of the revenues, we have 70% in the first part of the plan, and now it's going to be more than 30%. 32% of the initiatives of the plan in this 2nd phase are related with revenues, with personalization and the things that I told you before we are doing. So the plan is to continue with the growth that we told you last year.
You can see in this slide that the capacity of the company since 2008 until 2017 is almost flat. That's because in 2013, we reduced 15% because of the transformation plan of the company. But in the same way, in 2012, we knew that we were the one of the worst and we needed to reduce our capacity. We can see that now we have done our homework and we can expand our network and we are going to be in a good position to compete. So we continue maintaining the plan that we showed you last year.
Last year, we want to invest in our core markets, 75% of our growth will be in markets where we are operating, but where we want to strengthen our position. And the idea we have right now is to grow 1 third in the short and medium haul and 2 thirds in the long haul. This plan, we told you last year that was subject to the agreements with the policy with the different unions of the company. And this year we have closed an agreement with the pilot. 10th August, the agreement was ratified.
And now we have an agreement for the operation of 4 years. We are negotiating now with the ground people. We expect to close an agreement soon. And when we finish that, we will continue with Cabin Crew. But we are in the track that we told you to close agreements and to continue developing the company.
In this development of the network, Iberia Express is key, has been key and is going to be key. And why? Because Iberia Express, they have one of the best CASK in the industry below €0.04 They have the best operation, it's not one of the best, it's the best. They have been 4 consecutive years the most pungent low cost carrier in the world. They have a perfect alignment with our brand and also they provide the right tools to compete with the low cost carriers in Madrid, but also to feed the hub through the hybrid model that is working very well.
And for us, it's also a laboratory of new ideas. Also, we learned a lot of the operational excellence they have and we consider it's a pool of talent not only for Iberia Group but also for the IUD Group. We have flexibility. That's important because we know that sometimes the market doesn't work as we expect. We have a track record of changing the plans if required.
So we did it in 2016, for example. And now this is the plan that we have. But in the case, we see that the market is not behaving as we expect. We have some flexibility. We have flexibility because we are introducing in a company the new 350s, the 320neos, the new generation aircraft that are helping us to reduce the fuel consumption and also they are very friendly with the environment.
But we can play with the delivery of some of these aircraft. And also we have the 340600 that's our own aircraft that we have in our fleet. And playing with both of them, we can have a reduction of around 30% in the year 2023. As I said before, we are going to continue investing in the brand. While in Spain, Iberia transformation is well known and is very visible and the target segments, for example, the premium and trade up that Robert commented before are working very well and the brand fits perfectly.
We still have works to do in Latin America. So we are going to increase the capacity there, but in parallel, we are going to improve the product and we are going to invest in market in marketing in the 5 big countries where we operate there, Argentina, Brazil, Mexico, Colombia and Chile. You can see there the year where we expect to invest in the brand there. We are investing also in our customers throughout all the journey. We are investing in the aircraft.
We have new aircraft, but also we are investing in fleet and in the Wi Fi in the Wi Fi of the fleet. We are improving the connectivity, improving also the comfort. We have premium economy that we said before that is important also for the segment of the global gateway that Robert said. And I hope you had the opportunity to see the seat that we have outside. We are also looking at the payment system.
We are improving with virtual reality and also we are working with IAG Connect portal. We work in the ground transformation. We want Madrid to become a preferred hub for the customers, and we are working in a plan that we call Hola Madrid. A plan is to have Madrid as a place to do a step over, and we can say that it's going to work. We are going to launch very soon.
We are also investing in the premium experience. For example, last week, we have opened the new P plants that we have in Madrid in the T4. We opened some months ago the T4 in the satellite, but last week we opened also the refurbished launch in the T4. And we want to maintain the seamless operation. That is true that we are in an environment, as Javier said before, that ATC is causing a lot of problems to the industry.
We are suffering also the ATC. So we consider that to improve the operation and to manage the disruptions better is going to be also very important for us. In flight, we are working with cabin crew. They are going to have a more digital framework
to work.
We are developing a new service with better food quality and we are going to also to improve the customer experience through the digitalization. Talking about the customer engagement, we want to leverage our customer analytics in order to improve the interaction with the customer in every single point. We are going to launch what we call the customer hub. It's a place where we are going to centralize all the interactions with the customer. Some time ago, it could happen that you're having a disruption in SonaePort, but you receive an email with a promotion.
Things like that with a customer hub, we are going to avoid. And we are working also in the new claims portal. And talking about the digital customer journey, we want to be a digital connected airline and we are improving the customer operations with digitalization. And voice, we will say later that we consider is also key in this development. We put here the slide with premium economy to see what's the premium economy.
You can see the sheet. But it's a seat and a class that is working very well for us. We can find the seats in the 350s, in the 340, 600 and also in the 330, 300. We are flying to 13 destinations in North America and South America. It's improving the customer experience because you have bigger seats, better seats, you can recline more the seats.
And also we have bigger tactile screen, selective gastronomy and we are also improving the Wi Fi connectivity. So we are having a very good performance. Loss factor is around 80% and the perception of the customer, the NPS has arrived to around 45%. So it's helping to improve the NPS of the company. We have another example that we put here is that our new chatbot, we call iBot for selected customer, we have launched initially and also for several use cases like the ones we have here, flight info, taking, boarding passes, frequent questions and flight subscription.
We consider that voice that is growing exponentially is going to be also very important for us. So we are there. Also we are working with Amazon, with Alexa. So we have developed a partnership for the Spanish platform. And we are also partners with Movistar because what they call AURA Movistar Home and it's something that we consider is going to improve also the customer experience.
We can see now an example of the partnership that we are having with Amazon. So in summary, Iberia targets are aligned with group targets. We are going to have at least adjusted operating margin in the range between 9% 15% in this period. And also we are going to have through the cycle a sustainable rate of 15% with the plan that we have in front of us. We are going to develop the company.
We are going to grow, but we have flexibility in the case that we see that the market doesn't behave in the way where we are thinking. And all these, we are going to continue investing in brands, in customer, in operation and in digitalization. So thank you. I'm going to hand over now to Alex.
Good morning, everyone. So I'm going to go over British Airways and to start up the conversation, what best then to set the scene by discussing the platform that we're operating on. And this is a sustainable financial platform where we have advanced significantly on our cost base. We have been able to deliver record profits and record ROIC over the last 2 years. Later and I'll come back to wrap this up.
This is the message that we like to start up. We have been building a new British Airways that is able to deliver this investment grade performance. Today, I'd like to emphasize and talk about 3 different areas. To start with, growth. Last year we talked about a particular pattern of growth.
I'd like to come back and revisit that. Secondly, I'd like to tell you about how we have been advancing and what else we're going to be doing from a customer perspective and from a people perspective, our people. Finally, I'll bring that up again with our financial performance.
Let's talk about growth first.
On the growth side, first let's take
a look at what we have been able to achieve over the last few years. First, British Airways is the number one airline in London, 1st in Heathrow and in City, 2nd in Gatwick, but we're working on it. We continue to be the leader in traffic to the North Atlantic with 34 cities that will be served next year, including the latest additions, more on that in a second. And finally, we've also been working on Shorthole and it's not just the work in Gatwick, which I'll explain in a minute, but also the refinements and the optimization that has been taking place at Heathrow. Let's talk about the long haul for a minute.
From a long haul perspective, there's been substantial development in terms of destinations both breadth and depth. We have been moving fleets around configuring and addressing different types of demand throughout different points in the U. S. And around the world. You see different number of routes have been added since 2014 to try to bring that breadth to the proposition.
But beyond that as well, we have been strengthening the number of frequencies. If I talk a little bit more about long haul, you'll see that we have been deploying, as I was saying before, aircraft. You'll see the 318 now flying to Chicago or doing double dailies to some other destinations. We have been working with our partners, American Airlines to try to optimize that. You'll see now American Airlines flying once from Miami whilst we fly 3 times or American Airlines flying from Phoenix.
We're talking to them continuously about how we can design the best network across the North Atlantic. We're adding new destinations as well. You've heard about Durban, Osaka, Pittsburgh, Charleston. These are new committed destinations. Durban has just started, but the others will start through the course of the year.
We have a fantastic platform, the 787, 30 aircraft 787s will have by the end of the year 12-8s and 18 -9s, the -10s will begin to arrive from 2020. The -eight allows us to come into new markets, reducing the amount of risk and providing the right configuration and capacity to test those markets as we come in. We have to talk about some really good stories like Nashville. Nashville has been a destination that from the onset has been providing a very good profitability position. We're going to take it to daily next year.
We've been rejigging the aircraft, the fleet to be able to go and chase those profitability opportunities. Now on the Sharehold side, 3 really good stories. On the left hand side Heathrow, where consistently we've been increasing our load factors and we've been achieving this by redesigning our network particularly on the summertime. We began to do a bit of this on 'fifteen end of 'fifteen, 'sixteen now confirmed in 'seventeen. It has meant that we've actually been able to increase our shareholder profits in the summer by 60 percent since 2016.
Fantastic performance for Heathrow overall in short haul and we will continue to refine this. We've opened up nearly 15 different markets, new ones never served from Heathrow in the past. We'll continue to look for these opportunities, again, ShoreHole summer destinations. Gatwick is definitely dominated by our commitment to the Monarch slots, which we acquired at the end of 2017. And since about February of this year, we've been trying to slowly bring them on to the market.
The actual growth as you can see in quarter 3 net over the previous year, just over 25%, incredible growth, 90% of the overall growth has come in Gatwick, Churro from the Monarch slot. I'll come back to Monarch in a minute and Gatwick. We do aspire to have a 3 20 based Gatwick operation by 2021. At the moment there's a mixture of 3 19s and 3 20s. And last but definitely not least, on the right hand side, London City Flyer, an airline that has evolved significantly since 2013, you'll see an increase of capacity of 65%, doubling the margin going from a fleet of 14 aircraft to 22, we'll add another 4 by the end of next year.
Smaller in size, but this is profitable growth. Just a couple of points in Gatwick, very, very interesting. The Monarch slot bet has paid off. On the left hand side, you can see that the actual capacity on ASKs was an 18% increase during the period since we started to fly in comparison to the previous year. But it has delivered an increase in 20% in revenues.
This has exceeded our expectations a little bit. We're very pleased on how that has been going and there is more fine tuning to be done. The first summer of Monarch was put together in a hurry because we needed to get those lots to work. We are now becoming more sophisticated in refining that capacity and we'll continue to work on it next year onwards. And on the right hand side, if you remember 2 years ago, I sat here and I showed you a configuration of a brand new 777.
It was a 777 that had 10 seats abreast in economy. We now have the results. We have 5 of them flying. We'll have a 6th one by the end of the year. And we find ourselves that the extra 57 seats are delivering 20% additional revenues per flight, the same flight, same destinations, same aircraft reconfigured 57 additional seats.
But not just that, because it is a completely brand refurbished aircraft, Our customer satisfaction is increasing. And yes, absolutely, we have new interiors. So you'll see customers being significantly happier about that and a new entertainment system, very happy about
that. But also crew, crew are working in
an environment that is newer and customers appreciate it and NPS coming in from crew is also increasing. So this configuration of the 777 is working. We plan to do another 7 in addition to the 6 this year. Next year with that we will be done and we're definitely interested in continuing to grow the presence of this 777 in Gatwick over the next few years perhaps with a few additional units. This is the final picture in terms of growth.
Last year, we told you we were looking at growing between 2% 3%, CAGR throughout the 5 years. This year, we're going to step that up just by 1 point to between 3% 4%. And here you see the breakdown in the black columns, how that will be distributed, 3% to 4% in the U. S, 5% to 6% in Southeast Asia Asia Pacific, sorry, and Latin American, Caribbean and then on Africa, Middle East, and Asia Southeast Asia between 4.5 points. This is how we see the distribution of the growth over the next 5 years.
Now part of the picture of this growth comes together with a growing investment in product and service and people. So I'd like to tell you and give you an update about some of the features, some of these we've talked about before. Let me give you an update about this. First, cabins. On the one side, yes, we are committed to a new club world seat, which will be available from July of next year when the first A350 arrives.
Yes, that new club seat will address. We don't have a picture for you, but it will address all those issues that many of you have actually told me, as well as customers such as all aisle access, being able to start watching a movie from the moment you sit down, more storage, more space, more privacy. Our new seat will address that. We'll have 4 Airbus 350s -1000s next year with that configuration and 2 777s which will be completely refurbished and reconfigured in the inside. Couple of interesting pieces of data that 350 will deliver 331 seats and it was likely to operate where the current 7 47 MidJ operates with 334 seats.
Now we'll go from 3 class sorry from 4 class on the 747 to 3 class on the 350. But we are increasing a little bit the club seats. We are increasing a lot the premium economy seats, World Travel Plus and marginal climb down of the economy seats on the 350 in comparison to the 747s, very good aircraft, we can't wait to have it. The 777 configuration is also equally quite interesting because it means that a refurbished 4 class 777 with a brand new club world and an upgraded 1st class will mean 4% additional seats. We will take as we told you last year the number of 1st class seats from 14 to 8, we will mean we will keep actually increase by 1 the number of club seats, we will increase the number of world traveler seats at just about the same and we will increase economy seats on the 777.
In terms of cabins, I've told
you a little bit about Club World. We hope to be able to announce it at the beginning of next year. You will be able to start buying tickets on some of those flights before Christmas. We will do a product upgrade on 1st. The most visible part of the product will be catering and amenities, I'll mention that in a second, but the actual seat also will go through an upgrade.
Just like Iberia has done, we are going to also upgrade our premium economy seats. Those seats have had the same type of seats and amenities and food for quite a long time. We're going to come up with a new seat in World Traveler Plus, a cabin that we're quite keen to continue investing on. And finally, all these refurbishments will bring in a more modernized economy cabin. WiFi on the
left hand side, I'm happy
to report that tomorrow we'll have our aircraft number 56 on the widebody fleet completed. Most of you that have gone to New York recently would have been on an aircraft with Wi Fi. I know some of you, at least one of you has told me that you have been streaming videos. And yes, superfast, incredible in terms of connectivity, very, very good product. That rollout process continues.
We will be about 80% complete by the end of next year and there'll be a few aircraft left over in 20 20. Short haul continues. It's a little bit faster installation. We should be done by Q2 of next year. We've got 3 aircraft right now that we are testing really, really hard, different product ground to air, but similar speeds and performance.
We continue investing on catering, won't dwell on this too long. Catering and lounge is very important from Robert's study before when we were talking about the different things that are important to our segment, food and catering, very, very important. So we have been rolling out not just the club world, which most of you have already gone through and tasted, The world traveler first phase, so economy, we went through initial phase, which immediately drove customer satisfaction up. But beyond that, we've also changed Club Europe we continue making modifications in terms of the menu and Euro traveler. Next year, we will roll out a new proposition in first, we think is the time to begin to anticipate a potential the new product as we reconfigure the aircraft and we're also going to redo entirely the premium economy, catering and amenities.
On the lounge side, you will see all the different aircraft sorry, lounges that we have been opening over the course of this year and last year. We will continue opening new launches and we will be contracting new launches. As we expand our network, we have found ourselves with some airports where we didn't have an actual launch proposition. We are contracting those launches as we come even if there is smaller frequency in some cases. By the way, we're also improving as I know some of you have already tasted the catering in our launches.
Now all of this won't work unless our people are delivering it to the highest of standards and to the highest level of consistency. So we are spending a lot of time and great deal of commitment around making sure that the service component also works. Next year, we're going to be hiring about 3,000 people. Those 3,000 people, about 2 thirds of them will be cabin crew. They're going to be going from March onwards through 5 additional days of training more than what we have today.
Every single customer facing colleague will be going through an extra additional day of training next year on service. How can we be more consistent and deliver a better service to our customers? Are going to give them tools in order to do this technology, platform, simplified procedures, of course the product, very proud to be working with a new product on the ground and in the air. Technology continues to be underpinning all of these efforts. We have literally more than 200 different technology initiatives and projects going on within the company.
Ba.com and the app continue to be a great area of focus. We will continue to deliver more enhancements and more features on those platforms. This year, the performance of va.com and the app has exceeded last year's significantly. We're very happy how it is evolving. We know that we can do more, particularly all around as the rest of our colleague airlines are doing on self-service.
There are many other projects around technology. We can talk about chatbots and RPA. They are making our life easier. They're making the way in which we service our customers much better. Many of these technologies, we're just trying them together with IG Digital, but many of them become mature.
So we don't get tired of talking about the Mototalk. It is such a great experience. You don't experience
that
as much, but we know from an operational perspective, it's not just being more efficient, it's also safety. Last night, we did the first test of the 787-nine being pushed. We already tested the -eight. We're taking it into wide bodies. We cannot push back a 747 just yet, but we want to go in that direction.
It makes a huge difference from an operational perspective. And yes, of course, we're going to continue working on paperless departures. We just started in T5 and we see a tremendous amount of opportunities there in terms of efficiency, more on time departures, more control over the operation, better safety overall. Biometric boarding, statistically all of you have already boarded a BA flight I am sure by just looking at a camera, doors open, there you go. We're taking that farther in the U.
S. Now you can do that as you're coming back from Los Angeles, Orlando, the machines are in New York. We believe this is something that makes a huge difference. We do believe that a 3 80 boarding, a full Airbus 380 has taken us 22 minutes, 22 minutes to board. So we believe that this technology can make a difference in customer service and it can make a difference from an efficiency perspective.
Now, if there's one initiative I want to just highlight a little bit, it's on the right hand side and we call it first contact resolution. This is a big deal, not just for us, but for the industry, particularly in Europe. We are training every single customer service agent in Heathrow to perform every single function that any customer service agent can do. This means that whenever we need resources of a particular type and in a particular location, they will be able to go, they have the skills, they know how to re ticket, they know how to look at all the activities of a flight that's specifically more busier than usual. The training program has started, it will be completed by 2019.
As we equip all these agents with devices, you will be able to walk up to any of these agents and tell them any of your problems. And in the majority of the cases unless you have a really complicated itinerary, they will be able to service you right there and right then. That should and will increase the level of service in Keythro in incredible amount. All of this comes together with our strong financial performance and behind these numbers are a lot of very strong foundations. We talked to you last year about the restructuring program.
By 2020, we'll have delivered over $300,000,000 of savings. We've been working in the surface and water side, 20% more efficient than 2 years ago. We've been working on back office functions like sales support, over 30% increases in efficiency through automation and centralization. And we continue to look at our contracts. We have had a couple of voluntary redundancy programs and today Heathrow cabin crew 44% are mixed fleet, the new fleet of cabin crew that was created 7 years ago.
So that process continues. If you were to look at productivity of British Airways as NPEs, ASKs per NPE, you will see a 15% jump over the last 5 years by the end of this year, which puts us in a very good competitive position with all our European peers and the majority of our U. S. Peers. So our objectives, you have the numbers from the rolling 12 months from our Q3 results.
We maintain our objectives of 15% plus on the lease adjusted operating margin. We maintain the objective of 15% plus on ROIC. We commit to this 3% to 4% approximately growth versus last year's 2% to 3% and our end of period fleet size will be 316. My team is here, hopefully we'll answer all your questions later, but it's difficult as British Airways to come and speak to you today and not mention something which is materially important for us and will underpin a great deal of investment next year. And that is the fact that next year we become 100 years of age.
Next year there will be a lot of activities which will be supporting this investment, this colleague engagement, all these training commitments around new uniforms, we will talk about future airline careers. We've already begun to form new partnerships. We're going to talk about the future of air travel. We believe that British Airways can lead in aviation industry across a number of topics and next year we would like to spend more time talking about it. Indeed, I've asked Joanna Lumley to tell you a little bit about this specifically.
So I'm going to leave you with the video. We'll talk more later. Thank you very much.
Okay. Back to digital. I mentioned earlier that that was the final part of our investment case for IAG. We wanted to leave it till later in the agenda because a lot of the initiatives and activities that have been going on under digital have been featured in the operating company presentations that you've just received. We've got things going on in many, many areas and unfortunately I don't have time here to talk about all of them.
We've grouped them under 5 basic categories here and I want to give you an update on 3 of these. Firstly around what we're doing in the shop order settle space. This is also referred to a shop order pay. We actually felt settled was a better summary word for that part of the process. And update you on what's been happening since last year when we launched the new distribution arrangements with the introduction of a distribution technology charge.
Secondly, we want to give you an update on where we stand in in flight connectivity. You've heard some of the operating company stories, but we want to tell you about where we're at in terms of the overall group metrics. And finally, I'll give you an update on our innovation agenda under the Hangar 51 banner and related topics. So new distribution capability. NDC, which is the acronym that is used, is at the front end of the industry process for getting from people looking for an offer, getting a price, making a booking, getting ticketed, paying for their flight and then going through the process of checking in boarding pass and the back end settlement processes.
And in each of these areas, there's been a lot of legacy in the industry, whether it's around pricing, where prices are filed, list prices are published to the world, distributed through GDSs in the areas of booking and ticketing with paper tickets and so forth of the past and through all the other areas. And the industry over the last several years has been doing a pretty good job of shifting those processes, those legacy processes into electronic forms, getting rid of the paper. But actually in many of those cases, the fundamental process wasn't really addressed and the opportunities that are there from a modern digital redesign from a customer centric perspective have not been captured. And that's what we're setting out to do. It needs to be done in part at an industry level because we obviously interoperate with other airlines and other travel industry participants, but it also needs to be put live in our own operation.
And as well as being one of the handful of carriers that's really been driving this at an industry level. Glenn Morgan, who's in the audience here has been tireless in pushing this agenda. We've also been putting our money where our mouth is in terms of being one of the early adopters of technology and we have things in live or pilot forms in each of these areas. And I would encourage you to go and speak to our Serbia startup if you haven't already, and they can give you a lot more of the sort of detail of how some of these things like the travel grid, some of the basic infrastructure items that are going to support the new industry processes will work. So as I say, just about a year ago, we launched a new set of distribution arrangements where we're levying a distribution technology charge on tickets that are booked through the legacy GDS processes.
But that's really all about trying to get a shift across from legacy distribution to a modern digital distribution setup where we can do advanced merchandising, dynamic pricing, advanced fee selection and offer a full range of ancillaries through the indirect channel mirroring what we can do through our own direct channels. And we put in place at that time some transitional arrangements with some of our key agents because we recognize that this is a tricky transition for everybody. So we have a number of temporary commercial arrangements with key agents which are in operation today along with working with those agencies about adopting the new technology. We're making great progress on those. So the adoption of this is going to really start to rocket upwards over the next months.
We already have a significant number of unique services and content that we can offer today via our NDC APIs that you simply can't get through GDS channels. That range is obviously from the lower price of not having the DTC levied. But also through this channel on this mechanism, we can offer a much broader range of prices, get away from the fixed price points and offer closer to a continuous pricing model. We can offer things such as more options for buying pre seating, pre ordering catering, rich content rather than just being a green screen description of the offer. We have movies, pictures, proper descriptions.
And we can offer also servicing elements and this is going to be a growth area. For example, if you want to make a name change, you've got a misspelling of your name. If you booked your ticket through the GDS company channel, today you'll have to call a call center in order to get that changed through NDC that can be changed without having to call a person. And we have many more to come. So this is an area where we're alive.
We have an increasingly mature offering here and we're going to roll out new areas of advantages for booking through this channel. We've partnered with a wide range of technology providers. So for agents that don't want to put the investment in to connect directly to us, we think many will, they can work with any number of other technology providers who can facilitate that process for them. And really this is all about bringing benefits. Obviously, we see the benefits to our bottom line from this.
But crucially, we're also it's all about delivering benefit for our customers, but also for intermediaries, those that embrace this technology, and particularly those that are early movers, we think will gain some significant competitive advantages versus intermediaries that really try and remain wedded to the old legacy processes. So where are we? IATA recently published a target for the industry. They wanted to see the industry get to 20 percent adoption. So of all of the indirect bookings, I think 20% of them come through the NDC channel by 2020.
On a group wide basis actually where IAG is already at 17% coming via either NDC or the API links that we've got in place. Those other APIs will be transitioning on to NDC technology versions. And so we are very confident that over the next couple of years, we're going to be able to smash considerably through the target of 20%. The second topic I wanted to update you on is IAG Connect. So this is our in flight connectivity solutions.
In Capital Markets Day 3 years ago, we went public on a target to get 90% of our long haul aircraft connected by 2019. We are behind on that commitment. We've had problems with suppliers, with regulatory processes on the air to ground side and problems getting access to airplanes given Trent 1,000 issues on aircraft. But despite all of that, we are now really hitting critical mass. So by the end of this calendar year, we're going to be at 62% on a group wide basis of our aircraft will be connected.
And that's going to rise over the following year up to 79%. And by about halfway through 2020, we're going to be at or around that 90% level. We didn't set an equivalent target for short haul back then because the technology was still immature. But I'm very pleased to say that we will be expecting on a group wide basis to be at 24% connected by the end of this year. And that's going to rise very rapidly.
It's a much easier embodiment process. So we're going to be at 73% by the end of 2019 and then matching the long haul level by the middle of 2020. So I guess my message is, Willie commented that a lot of We're really now at the point where we're beginning to get to scale deployment, which We're really now at the point where we're beginning to get the get to scale deployment, which is really going to unlock capturing the value that that's going to bring. We talked about Doteir, this is the in flight connectivity portal. I won't go through all of the things that offers.
I will just emphasize the first point. This is a service which is a consistent product. We've developed centrally. We have one team that has developed this. It's obviously skinned and adapted for the individual airlines in their own colors.
But I think we are the 1st in the industry, in fact, the only provider that's managed to get that consistency of customer experience regardless of the connectivity provider that you're using. So we have some aircraft which are we're using Gogo based services, others we're using Panasonic and on the short haul side it's an Inmarsat based solution. In every other case, every other airline that has multiple supplies, you get a completely different customer experience depending on which provider you're with. We've uniquely managed to put in place a layer which enables that to be aggregated and presented in a seamless fashion. We rolled it out 1st on level.
Vincent talked to you about that. That's been I think going really well. We still got we've only just begun to tap the potential of that as he was saying and we did manage to win an innovation award which I was going to call out last year from Apex about the best in flight entertainment innovation. And in terms of going forward, in 2019, we're going to start working increasingly on the in flight service potential of this platform. So for example, shifting to an on demand restaurant style dining where again, Vincent mentioned some of this, but this is something we're going to do across a number of the airlines.
Aer Lingus is very keen to be an early adopter here. Move from a supply led catering process dining process into an on demand one where it's a customer selects when they want to eat and be able to pre purchase. Finally, on the broader innovation front, we have built a very broad network of partners that we work with across the world. We haven't opened a big lab in Singapore, which I think one of our competitors recently announced. We're taking a much more asset light approach to this, working with partners across the world to tap into the best of innovation and startup community wherever that is found.
We're also working with some of the leading academic institutions, so the Alan Turing Institute here in the UK and Berkeley in the U. S, particularly on some of these areas such as the application of advanced artificial intelligence processes. This is an area where you really want to they are the marrying of our data and business problem with their academic stuff is really very powerful. If you want to see a happy academic, you land them with a couple of petabytes of data and get them to work on solving a Nazi problem like applying machine learning to airline pricing. This is all about our team being able to scout and find the best startups out there in the world, bring them into the business through our Hangar 51 acceleration process, also to incubate.
So Motiv SOC is an example of a business that we've done. Basically we win them from the point of complete startup through to what you've seen today. And then in a number of cases we're also choosing to invest as a business. I'll come back to the investment in a second. On our Hangar 51 increasingly getting very high recognition as one of the best corporate accelerator programs out there.
We've gone we've reviewed and screened over 1200 startups through that process since we've been running it. Those applications have come from over 40 countries. We've had 24 companies participate in our programs And of those participants, 100% of them are still trading, which may sound like a low bar, but believe me, if you know this market, that's incredibly high success rate. 66% of them are classified as high growth and 8% have actually gone all the way out to exiting and making money. Exiting is good in this space, just to be clear.
So I
think we really have a world class platform for incubation. I've put on this chart some of the categories of the domain areas where these startups are working. Autonomous Vehicles, if you were here last year, you saw some of the things we're doing there. Machine vision analysis, I think is a very interesting area. Unfortunately, what the startup we're working with that couldn't be here today.
But if you imagine taking the camera feeds from all of the stands on the airport and having machine vision analysis documenting exactly at what point the steps arrive, all the points of aircraft turnaround and generating that data and storing that data for analysis or for real time interventions where we have processes that are going off track. I think there's a lot of potential there. I mentioned artificial intelligence. I think there are fantastic application areas in our business. Chatbots you've heard about, robotics, a number of areas.
This is the Motorsoc example we've mentioned a number of times. At the top of that is the geolocation track of where all the pushback tractors used to how they used to move around the apron. And you can imagine the kind of difficulty of managing that operation and also some of the congestion issues you get with tractors moving around the airport. That was back a year ago. Today, we have a very different story with a unit devoted to a stand, able to push back and then return back to its base.
You have a very cleaned up set of processes. We've seen 50% reduction in pushback delays, much simplified safer operations and significant reduction in emissions. I mentioned we've also now moved on in our maturity as a group into actually also investing in some of these startups. And there are 6 here that we've invested in. 4 of them are sorry, 3 of them actually we'll footnote 4 of them are outside.
Sarevia and Deep Air are kind of 2 halves of the same team.
So if you haven't had an opportunity to
do so yet, I would really encourage you to go and talk to them. The reason we've invested in them is because we think they are a fantastic opportunity for helping to transform our business and indeed the industry. So we've done a lot of innovation, we've done a lot of exploration of where digital technologies can help transform our business. But increasingly our focus now whilst continuing with that innovation is to focus on scale to deploying these technologies at scale, whether it's in AI, inside warehouses, chatbots and other topics. We've got a number of areas where scaling we're now at the point where we're going to really start to achieve value at scale.
I'm going to hand over to Lynn now. A number of these pictures on here are actually cargo examples. And Lynn's going to take you through how we're actually applying these principles in the real live operation.
Good afternoon. There is something quite odd about being in a vehicle that stops at a junction when nobody in the vehicle has touched the brake. And that's what's amazing about digital is it makes you look again at everything that you consider normal and reimagine a new normal and then build a future on the back of that. Now that was a clip that we shared on social media in January on the back of a trial with OXOTICA. This tech is interesting.
It doesn't use GPS, so it can work in buildings and under buildings. It's based on camera and laser, so it learns its environment. And by the end of that trial, the cargo pod could drive and say, that's a truck, that's a truck, that's a truck, that's a human, that's another truck, that's a human. Very successful trial. Since then, we've been doing 2 things.
Oxbotica, we've linked up with the cargo tug manufacturers to adapt that technology to work from a milk float into a heavy duty vehicle. And Ocpotico, while learning building on the learnings from the trial, the little difficulties we found. So for example, that is a very polite cargo pod and it stops when it is a badly parked vehicle and waits for the vehicle to get out of the way. So the technology still needs some work. But what is absolutely clear is there's real potential for that technology to make a difference in our business.
And if IAG Cargo is one example within the group, we're a very strong business, but we are undoubtedly over the next few years technology is going to make us even stronger. Better asset utilization, reduced costs, more revenue and just barely aspects of the of our strategy that I want to spend a few minutes on. Firstly, commercial. This is a well trodden path for passenger airline, less so for cargo. At the end of last year, we relaunched our website, new look and feel, new functionality.
And this year in 2018, our online bookings have quadrupled. And it's well established that channel shift drives real cost savings. So in the middle of the year, we invested in a Head of distribution and an agile web team. And their first functionality was released last month, which is a simple uptrade prompt. So here's the price that you asked for, for the economy product, but here's a better product if you'd like to buy it.
And on the back of 21 days of data, this functionality alone is going to pay for the cost of the AgileWeb team 5, 6 times over. So when Willie said we're willing to invest where we think we'll make returns, there are clear examples. But there's a natural cap to how much online booking we can get under current practices. And the key thing is about half of our bookings are made at what we call spot rates. So this is freight forwarders, folding around, trying to get a best deal and negotiating, asking for a quote for a specific shipment.
So we've got a team of a global sales team who are using their judgment to provide quotes all day every day around the globe. These people are intelligent and they are experienced. But in chess, Gary Kasimov is intelligent and experienced and AI can play chess better than he can. And we are convinced that this is an area that is ripe for AI making a difference. So we started the journey.
We have completed the stage of replicating the offers that our sales team put out into the market. And in January, we'll start the next phase, which is algorithmically produced guidance given to the human. But the end game in here is automation. So data rich, machine learned, automated spot pricing, consistent no matter who you are and what channel you go through, optimized, it's beautiful. Moving to the operation.
I've said before that cargo only goes by air if it really matters. And so automation and digital in the operation is not just about cost efficiency. It's about better operational performance, which leads to better customer satisfaction, which ultimately drives revenue. And if you start here, the movement of airfreight is governed by paperwork and masses of paperwork. This is generated by government regulations, customs regulations.
It's all initiated by the shippers and the freight forwarders. There's a lot of it. And as you'd imagine, we're working with IATA to try and eliminate this, for example, promoting common data standards so that it can be digitalized. But whilst we still have paper, there's 2 things that we've launched to help us manage our business better. The first one on the left is an e pouch.
So this takes scanned documents, uploads them and therefore enables us to process documents before the arrival. Over here, it's probably more exciting and this is where we have used and trialed and now are rolling out optical character recognition to take a paper document and to read it using machine learning to understand the oddities of cargo documentation, so that we can then digitalize all this paper document and turn it into e documents. And e documents matter, they are faster to process, that's good for customers. They're more efficient to process, that's good for us in our cost base. And these documents can get lost, which is good for a robust operation.
Moving on, tracking technology and tracking devices are now well underway within IG cargo. We are now able to carry customer devices across the group network. We are using tracking devices in 3 areas across the operation. Firstly, trolley tracking in Madrid. Trolleys are the things on wheels that carry the freight around.
What we've learned from this is that our trolleys aren't always where they should be. And this matters because trolleys are expensive. We don't want to buy any more of them than we need to. This is the telematics data visualization that helps us really understand how HITOR is working and how we better manage the day and allocate jobs and resources. And then the new trial on global ULDs, so ULDs are cargo containers.
And the management of cargo containers is complex. It's imbalanced directionally. It's global. It's messy. It's a planner's headache.
And so knowing where they are makes a real difference. If you've got the right containers in the right place at the right time, you can carry all your freight, you can maximize your revenue. So real opportunity here for technology and tracking devices to make a difference. So this is Seamus. And Seamus works in our Dublin operation.
And Seamus doesn't normally wear a hat. But what's cool here is the technology in the back of that hat. If you're working in an operational environment, a real time live operation, real time data, real time information and communication is key. But an airside environment, remote working, noisy, physical work is not conducive to communication. So we've teamed up with Modulus Labs, which were our pick from the Hanger 51 event.
And Modulus Labs are exploring with us some really neat technology, which is hands free, ESP free communications. It works on phone conduction in the skull, effectively vibrations that send messages to your inner ear. I think of it like having a conference call in your head, which allows both team group communication and one to one communication in two directions. So we're really excited about this. It's early Hangar-fifty one activity for us, But importantly, Seamus likes it.
And then to my final piece of operational tech is an ongoing check. Now if you know what freight is where in your warehouse and really importantly if you know freight that shouldn't be there then that's the way of getting really good high delivery and customer satisfaction and customer performance. But very often we do have freight that shouldn't be in places in the warehouse and it's really difficult to get at. So BOM checks are notoriously they're manual, they're very labor intensive, they're very slow and they're very error prone. And the cargo environment with its different boxes and shapes and sizes and labels is a particularly challenging environment to adapt technology to.
So that's what exactly what we're doing and we're looking for technology that helps us do bond checks much quicker and much more effectively. And I'd like to share with you a clip from our Madrid warehouse trial. So these are just some examples of the digital leadership that's going right across the group. We've got more initiatives, but we're not ready to share them with you right now. But digital is unlocking the potential of IG Cargo.
It's energizing our business. It's helping us learn to challenge everything that the business does and it's helping us attract real talent into the business too. But ultimately this is about bottom line profit and we are embracing digital so that we can deliver more value to shareholders. Andrew?
Thank you very much, Lynne. Well, that concludes the strategic investment case part of the day. Coming up after lunch will be the financial investment case. We have 50 minutes for lunch. 1 of BA's caterers, Del and Co, will be serving a mixture of Club Europe and Club World.
Catering, as I say, was very popular last year. I hope you enjoy it. If you can remember the faces on that management committee page that Willie put up, then they're all here today. So you can if you've got any questions about IAG, do make them. We have several forward members as well and also the senior management teams of each of the operating companies.
So could you be back here at 1:50? Thank you. Can everyone please take their seats? We're about to start the second part of the day. Unfortunately, I think we've been serving too much and too good at lunch, so people are still enjoying themselves.
Whilst we wait for the last few people to struggle in, can I remind you that the I believe the feedback section of the app is now available or should be soon? So if you could start giving your feedback on the app, that would be very helpful indeed. I'll now hand over to Enrique Dupuy, our CFO, to take us through the financial investment case.
Thanks, Andrew. Good afternoon. All of you. So this is the last session after lunch. I'll try to make it more digestible for you.
So coming back to this investment case chart, which I think is very interesting. We've been hearing a lot of interesting messages on the left hand side of the chart. So on our assets, on our values, on how we do things, on our projects, on our programs. But all these important bits and pieces need to fit and to feed our machine. What is our machine?
Our value creating machine. And when I was doing my internal rehearsal yesterday at home, I was tempted to say, yes, this is like a Ferrari. Our machine is a Ferrari. I thought it twice, it's not a Ferrari. So a Ferrari is quick, speedy, cool, but it's vulnerable.
It's delicate. Now we don't want to have a Ferrari. But then the other extreme is should I say it's a Land Rover? Okay, it's Land Rover, yes. It's strong, it's robust, but Land Rover is not really too blunt.
So I think I got the solution. It's like a Range Rover. So we would like to combine these qualities that we have in the companies of our group, these values around our brands with this ability to work on difficult conditions, not only on difficult conditions, on all terrain conditions. And that's something that I would like to explain you or I'll try to explain you through the following slides. The first one is historical.
We are going to go through some historical slides now. It is showing how we've been improving our operating profit, the operating margin of our different companies through time. So since the merger in 2011, we went through a couple of difficult years not only for us, for the industry. They had to do with post Lehman, they had to do with heavy restructuring needed and we went through it. Since year 2013, it was a steady it has been a steady pace of progress.
In terms of absolute figures that we have been able to achieve operating profit figures €1,000,000 being created, but also in terms of operating margin and that has been for the group, for IAG as an average, but also for the different companies. And we see the progression that all of them have been experiencing for the positive in the last 3 to 4 years. Even welling which we see there as a little bit of a bumpy road has changed dramatically and it's much stronger and much more capable now of producing sustainable returns. They've been going through some issues related to disruption, which probably by the way they are not falling so much on their side in terms of responsibility. But they will be getting there in the next in the following years.
Our intention keeps on being to converge into higher levels of operating margin and returns. And that's for all of them and for the new ones to come. So this is basically again historical. It has to do with the strong track record in earnings per share. It's one of our growing
in
growing in terms of KKR year after year since 2013 by 40%. So it's an astonishingly high figure. And it demonstrates how we have been able to produce total turnaround of the companies of our group. And we are reconfirming again today that our goal is to be above 12% for the next 5 years in terms of our CAGR EPS growth. And then again historically on our return on invested capital figures or ROIC ratios.
And we again can see how they have been improving dramatically since 2013 and for the different companies. And here I would actually share with you some of the concerns that we have been hearing from you and we have been having internal discussions about them. On the adequate level of ROIC that we should be signaling as a planning goal, because we need to be able to optimize this delicate equilibrium. We could say, look, you're doing very well. Why not to aim to for a 17% or an 18%.
Okay. That could be a way to look at it. But what would happen then is we would have to restrict our growth alternatives, our growth opportunities because not only the not every one of the growth opportunities is going to be allowing us to get to the 18%. So that would mean that we'll have a smaller and under risk in terms of size of group into the future. And then we have the opposite type of alternative, which is, okay, why you are not why shouldn't we be more permissive?
Why don't we aim to 14% to 15% because that will allow us to grow faster and to maybe aspire to higher level of market shares. But when we run the numbers, the contribution of that second alternative in terms of value is negative. It turns negative at the point in time. So this is how we value and judge and decide on the right level of ROIC we aspire for. And the 15% sustainable level of growth through the life of this plan is getting to that right balance.
And in fact when we compare our ROIC levels both IG and the different companies of the group with the rest of the guys, they look quite nice. In fact, as you will see afterwards, they look nicer than it's reflected on the market share price differences. So, okay, we think we are where we should be in this respect and we are aiming and achieving the right level of returns. Again, this is the final test of these assessments that I've been making a little bit on a naive approach, because this is just comparing with the same metrics, the same ratios ourselves to the companies in FTSE 100. These are the same multipliers that they use.
We haven't touched anything. They are not our targets. We our targets, our goals, our ratios are calculated in a little bit more sophisticated way. So we don't use return on equity on book value of equity. We think that's a little bit too blunt, okay?
But this is how it's expressed here. So when we go through the figures, return on capital employed for example, which is also on a very accounting basis, return on equity, the level of leverage of net debt to EBITA. We appear to be on the first quarter high. So we are high, quite high. And some of the metrics, very high in airline.
We have included all the metrics we have to do with our progress. So how is our CAGR growth in terms of EPS? And then again we are in position number 20. So people really understand that an airline can be the 19th position in the FTSE 100? Wow.
Maybe today, but not 5 years ago or 10 years ago, it looks quite an achievement. And the same in terms of our operating cash flow CAGR growth on 15th place. So I was proposed to bring here the last chart, which is the erupting one, which is PE because in terms of PE we are not on the high first percentile range on the FTSE 100. We're in the lowest one, okay? And that's something that I need.
I'm going to be commenting a little bit in the next slides because the reality is the progress that we've made, the group, the companies, IAG since 2013 has been formidable. So when so for example portfolio diversification. So we are really much less volatile now than 5 years ago as a group of companies or even as individual companies when we follow how our net earnings have been evolving, the volatility intrinsic volatility embedded, it shows We are much less volatile. And this is a matter of elementary risk downgrade. So we are also significantly better in terms of profitability.
So we were around 6%. We are now 13%. We are having a much stronger balance sheet. So 1.4 we'll talk a little bit more on leverage and financial resilience in the next pages. We are more flexible.
We have a very type of diversified source of funding and source of I would say asset ownership, which allows us to be really very comfortable with the way we deal with flexibility, with the way we deal with residual value management, with the way we deal with tapping the different sources of funds to get the more convenient one to sign. We are a much lower cost group of companies than in 2008 of course, but even on 2013, 2014 I think Iberia has been showing us their own performance which is absolutely astonishing. But we can only bring we can also bring a Lingus 1 or a Brits Sherwood 1, which would be showing a very similar pace of progress. We have a lower type of cash base, but we have also a lower fuel cost environment. So 2,008, we were struggling with $130 per barrel in terms of prices.
Today, we are slightly more uncomfortable than 12 months before. But at that time, I remind you the percentage of fuel cost on the total cost of an airline could be reaching 35% or even 40%. Now we are on the 25% fish. So better again. And we have a much better and efficient fleet compared to that with the one we had 10 years ago or even 5 years ago.
The last one is also very interesting, because it's part of what we are today thinking and aiming at, which is we have a higher content of low cost tools on our toolbox. It's not only dwelling, but it's level. It's IPD Express. Ellingos is a very type of versatile, but also low cost, low price producer. So the content of that side of the market in our toolbox and our organization has been increasing very substantially, because we believe that's a growth market.
And it's a market where we can do good things. We can earn money, we can participate and we can expand our presence. So this please take it with care. This is nothing as a projection. This is a pure theoretical exercise.
It is fiction, please.
So we don't want to
advise, look, this is Enrique, this is what he is seeing for next year, not at all, not even in 5 years' time, okay? But as a matter of our own internal procedures, our own internal reassurances, this is an exercise that we do normally. Every year we test our business plan. And this year we decided to test our business plan with a little bit of an atypical example, which was what if we had to face in the next 5 years a situation where the stress on our business case could be similar to the one affecting the industry and ourselves in the Lehman Brothers type of dark September. So we run the numbers because they are there.
It's pure history. This is facts. It's fictional facts, but it's facts we haven't touched a figure. So we replicated how our revenues had dropped very significantly. We replicate how because of the crisis the fuel prices dropped.
Again, we take the same assumption. We replicate how we manage that type of situation in terms of management actions. The conclusion is, we would be getting by the end of that year or the following year into a situation where instead of having an operating profit of say 3.1 percent which is consensus, I'm not telling it's going to be 3.1 percent, it is consensus. We'll be getting to 2. Come on, this means we'll be making money, bottom line and we'll be distributing dividends.
We will be distributing dividends. So this is again friction. It's an example. It's a provocative type of exercise, but it shows the strength of the model today. It shows the strength of the companies of the group together with the holding.
It shows the rain scrubber. So this is someone else telling us pretty much the same. So we've been working with these rating agencies for months, probably years. You I think you know they don't love the airline industry in terms of to become investment grade on a different business they will be requiring adjusted net debt to EBITDA in the range of 2% to 2.5%. For us it's much less than that because they have a structural difficulty to understand the risks inherent risks of the business.
So they've been very tough. Finally, they have recognized our strengths and values. And both S&P and Moody's have been positioning us at the investment grade zone. Remember that has been one of our type of goals planning goals. We want to be on the investment grade zone.
We are. Pick the box. And now a couple of slides, which show Ben a little bit of our frustration. And it's again maybe a little bit provocative. So we don't understand it.
Maybe you or maybe someone in the market understands it. But it shows our multipliers, our multipliers against our peers. And we show how across the board we have been using the multiplier of the group 5.7% if it is the case on PE 5.7%. It's poor. So when we compare our 5.7% with the peer companies, the more comparable companies for each of our companies of the group are OpCos, well, the distance is quite extreme in some cases.
Of course, we can always find arguments. So when we say the U. S. Companies, it has been said today, they hold 80% of market share between 4%, 85% of market share between 5 aircraft airlines. That's a highly consolidated type of market.
We are below that, but we are 63, come on. So there should be a little bit more of a recognition of our ability to really operate our companies in a rational way. In Europe, I think that's the case, right? It is being demonstrated. One could say look, but the local airlines have been demonstrating that they are more resilient or more capable of going through difficult periods.
That may be the path. I'm not so sure about today. I would argue the contrary probably. I think I would argue strongly the contrary. And we are seeing some late developments on that area that showing a little bit of this different concept.
Okay. It is what it is. And then we go into the other relevant multiplier, which is enterprise value to EBITDAR. We get to a similar type of scaling down. Well, having showed a little bit of our frustration, let's come back to our model.
And our model really it's basically reflected from the financial point of view in this chart that we tend to repeat each time. So again as a summary, this exercise of refreshing our rolling business plans and getting into BEP23 has been challenging has been challenging and showing at the same time opportunities and showing at the same time tasks. So the challenges of course come from the fuel price. So last year we were talking here on a reference base fuel price for the period. It was 22 dollars it was sorry in 2017, 2022 dollars of $500 per metric ton of kerosene.
And today these figures have been built up with $700 So that's a 40% increase, a 40% increase on a cost input that represents slightly above 25% of our total cost base. So all of those numbers that is a big hit on our base profitability. So that's challenge number 1. Opportunity number 2. So this of course is going to be creating a lot of stress in some of our competitors.
Some of them will be successful. Others maybe not. And we are seeing some reality shows around it. And probably there's more to come. So when we say we are planning for a growth of 6% that means that on that 6% which is something that we will be monitoring and reevaluating periodically.
So that's not a sacred figure. We count on things happening on the markets adjacent neighboring our basic strategic markets. So what is then the 3rd piece? The 3rd piece is this recognition of a task or a pending task. And this pending task is about preparing the group for the new challenges beyond 2022, beyond 2023.
That's strengthening the group. That's improving our positioning towards our customers. And we've been hearing a lot of messages in this sense today. So these have been the basic three columns that we have been using to rebuild our business Plan 23. With one restriction, you have to make the same money.
So free cash flow the same 2.5 euros average €1,000,000,000 per year through this 5 year period not constant with ups and downs of course. So that has been the frame and that's why we are going to be talking and here is more in the following slides about growth, about CapEx, about EBITDAR, about equity restructuring dividends. Growth. So growth not a lot of novelty. So the 5% CAGR growth in terms of ASKs that we proposed last year is still there as the basic column.
So it's about tweaking and improving and trying to take some opportunities that are going to be there. And they have to do with basically which shows growth opportunities in Patrick and also in City Airport basically in Patrick. It has to do with elingus opportunities around exploiting the new A321 extended range. That's a game changer. And it's a game changer for Eligos.
It's an aircraft that we'll be using through the day in the long haul and in the short haul. So the potential value creation of the HS2124 for El Lingus is huge. Then it's taking trying to grab also opportunities around Austria, level Austria or around level project in general terms. So it's a very, very selective approach. This is not about growing more.
It's about growing where we feel we have real opportunities of retaining margins and creating value. Iberia and Welling are going to be basically keeping their pattern and maybe slowing it down a little bit on the 1st year 2019. So that's the story about growth. And this is the relevant one around EBITDAR. So last year we were saying average for these 5 years 6,500,000,000.
This year we are saying SEK 7,200,000,000 and that's it's a bumpy road, because it's big challenge. On one side, there is a big negative coming from fuel as the first real factual impact at $700 per metric ton of Kerosene. But there is also a very important belief in being able to recover most of it. I don't know if you hear that it's showing 100%, but it's a very high figure of recovery, very high percentage through revenue management and through other revenues. So that's the basic challenge in terms of margins and EBITDA.
Apart from that we'll be creating more value around growth. It's going to be profitable growth. It's going to be improving on a net basis our EBITDA figure and also our operating profit figure. And finally, there is also managing non fuel CAS performance. So here, don't take me wrong, yes?
So this is not unit, this is absolute and it's a green or a blue. So it means the absolute level of CASK on an average performance through the 5 years is going to be lower. It's not unit basis. And this is how the growth in terms of ASKs is going to be executed. These are our basic fleets in the short haul and in the long haul as well short to medium haul and long haul.
As you know in the short haul it's basically around the A370 family aircraft. We are going to be discontinuing we have already the 767s. It's worth to mention that to be decided line. And the to be decided line shows the level of flexibility and optionality that we are going to have in the next fleet decisions. It's about 27% in the short haul by 2023.
It's about 35% in the long haul by 2023. So as an average short plus long, it's about 30% of the fleet that we think we are going to be needing in 2023 is undecided. So good for the aircraft manufacturers to know. Okay. So this is a little bit more of detail about the aircraft additions and the aircraft return.
So he's bringing new fleet. Again, this is a good reminder bringing new fleets not only for growth, but also for replacement and rejuvenation of our feet and you'll see a chart later on that show. So what I want you to focus here is again on a net basis you see that Italy is on a roller coaster. When you ask us every time of our pattern of free cash flow, it's rollercoaster. It is a rollercoaster because of this.
So year 2018, I was commenting some of your colleagues this morning, year 2018 has been a very heavy year in terms of net CapEx, 38 aircraft. And year 2019 will be slightly lighter, but then coming back in 2021 and then 2023. So this is why we are showing average figures for free cash flow because on a year by year there's a huge lot of difference. And again, here is how it will be replacing old fleets older fleets and bringing new generation aircraft to our fleet structure on this 5 year basis growth of 6%, which will be bringing down the average life of our aircraft from the prevailing 11 years into 9 years, which is a big effort for an airline. Remember an aircraft could be lasting 22, 24 years maybe even in some cases longer than that.
So this is becoming a very young fleet. And again with these basic formats, which is I will be talking about dynamic flexibility. So it's flexibility that we keep year after year on our capacity decisions, on our fleet decisions. So both you see the short haul and the long haul, what we would be doing is deciding on a year by year basis the more appropriate size of our fleet into the future into how we see the following years to come. But the ability to fine tune to bring down the figure or to use this flexibility and optionality to get some further advantages, advantages in the way we deal with manufacturers, advantages in the potential deals, M and A deals even that we are envisaging.
This shows a very significant ability to reshuffle, optimize, digest fleet into the future. So net CapEx and that's something that will appear as maybe a surprise. We were saying in last year we were averaging €2,200,000,000 on this 5 year exercise as CapEx. And now we are bringing a figure that it's €500,000,000 higher. And of course, it's basically around these two reasons, these two type of use of funds that we have identified separately.
On one side, it's about the fleet requirements. And the fleet requirements both for growth, but also for replacement for making our fleet younger. And that could be somewhere in the range of 50%, 60% of the total. And the rest is basically to deal with this task, this significant type of commitment that we have in terms of improving the strength of our business models, improving the resilience, improving the customer proposition that the different brands and companies are announcing and will be announcing, improving the tools that we'll be using in terms of AT and data management. So this is very relevant.
It's very important. It's building up the future of the group beyond 2022, 2023 and we are absolutely committed to go through it and to go through it on an efficient basis. So these investments both in growth replacement of fleet and strengthening of our model will be rendering the increased margins since 2022 onwards. So this shows this is a typical chart that we have been showing every year. Again, how the basic balance of the sources of funds that we'll be achieving and the uses of funds that we'll be allocating is going to be working.
So again, powerful EBITDA average figures 7.2 and natural type of net financing proceeds from our natural borrowing keeping our leverage where we want it to be. We'll be producing additional funds. We have an initial buffer in terms of cash and credit lines, which is very significant. We'll be phasing our CapEx. We'll be phasing our pension and restructuring obligations.
We'll be paying our lease rates, interest and taxes. We'll be paying our ordinary dividend and we'll be keeping a significant headroom above. This is the other way to look at it. So this is I remember maybe it was a couple of years ago Willie when we were just mentioning about showing our shareholders a bit of cash. So I think it was 16 or so.
Show me your cash. And I think we really were reaching that commitment. I guess we need to show the cash to these guys. Of course, we need to. And this is how we have been doing now.
So we have been showing cash, paying cash and paying quite sizable amounts of dividends and share buyback. What we are showing here is we kept part of the funds that we generate. You know why we kept it? Because we wanted to deleverage the group. That was part of the exercise.
We wanted to get financially stronger and we did it. We were using these excess funds being produced on the payment of dividend to strengthen the model financially. We don't need to do that into the future. We are already where we want to be in terms of leverage and financial strength. We are not going to be deleveraging more.
It doesn't make sense. It's inefficient. So just want to show you the headroom that we have, the headroom that we are going to have into the future. So that's the probably unveiled source of potential value that I'm bringing to you today. So I think we'll be using these excess funds to create more value all directly giving back or through appropriate investments that we'll have to explain and get approved at the appropriate moment.
Thank you.
Thanks, Enrique. Maybe you'd stay here and you and I can take questions as usual. I think Enrique quoting me saying, show me the cash is one of those fictional facts. So we say no more than that. I promise to behave today.
So Andrew is going to select people. We have 2 microphones. David has 1, Andrew has the other. And please feel free to direct your questions to I. Obviously, we have the rest of the management team in the audience and they're happy also to answer some of the questions if it's more relevant directly for them.
So Andrew over to you and if you can.
Thanks.
Jamie?
Jamie Rowbotham from Deutsche Bank. Thanks for the presentations. Two questions from me, one for Willie and one for Enrique. The first one, Willie, I heard the CEO of one of your competitors suggest this week that the whole aircraft system is at the limits of its growth given airspace and control issues, pilot shortages, infrastructure constraints. Is that something you would agree with?
And assuming a weaker macro doesn't provide a temporary solution, could that an inhibitor of the growth we see IAG targeting today? And then the second quick one for Enrique would be, as we stand today, what are your priorities for that excess free cash flow that you just showed us on Slide 172? Thanks.
I wouldn't agree. I think there are definitely bottlenecks in the ATC system in Europe and they're specific to intra Europe. And you've seen that we've already modeled that into the growth plans for 2019 with the presentation that's in particular Javier gave you showing the scale back growth plans. So we would see those ATC restrictions continuing in 2019 and 2020. And then with the right focus and I think there is certainly a focus on this now both within the ANSPs air navigation service providers and at the political level in Europe to address this.
So you've probably heard me talk about it. The 2 real bottlenecks that we see, Marseille, which has a disproportionate impact on welling because it hits Barcelona and Karlsruhe to the north. So you've got these 2 major pinch points. Both of those can be addressed with adequate resources. So as Javier mentioned, what we've seen today is airlines are investing in resources to deal with the ANSPs failure to invest in resources.
That's got to be addressed and it can be addressed and I would expect it to be addressed in time. I think it's also important to point out that the balance of our growth actually is outside of Europe and we don't have similar impediments there. So the transatlantic growth that you see Erling is talking about and that we'll pursue at level. We're not seeing any ATC restrictions and we're not anticipating any infrastructure restrictions that would impact on that. As Stephen said, the growth at Dublin is based on a plan that's coordinated with the DAA.
We're getting good cooperation there. So I have some concerns about intra Europe, which is going to impact on us. But as I said, that's reflected in the short term plans that we have. I'm less concerned about growth in the rest of our network.
Yes. So as we have been saying and commencing very publicly, we believe in consolidation and we review periodically on a regular basis consolidation opportunities for IAG. And we've been public in expressing interest in some companies that you know well. But that's an exercise that will be done on a recurring basis every year. And they will be proposing our priorities to the Board and the Board will decide the right decision on this respect.
So it will be these type of M and A opportunities and if not it will probably be a way to return shareholders additional money through different options. Basically the ones that we have been using recently because of the low price of the shares of IG is share buyback. But eventually we'll be using other ways. But that's basically the sequence.
James?
Hi. It's James Hollins from Exane. 3 for me please. The first one is on Qatar. There has been some comments that they are potentially going to leave the One World.
I know, Willie, you know ACVAR pretty well. I was wondering if you could comment on whether you think that's likely and also the potential impact on your JBA if that were to happen? And also I think in the presentation you mentioned there was scope for your relationship with CATO actually getting better. I was wondering what you meant by that and what could be done? The second one, typical analyst, I'm afraid, talking a long term strategy.
But looking nearer term, should we be thinking about 2019 as one of the years where CASK ex fuel is not down 1% because some of those investments? And then finally on the sort of level versus dwelling case, it feels a bit like welling is kind of moved back into the relegation zone versus level. Is there any sort of thought process that hypothetically another Vienna came up? Is it guaranteed you'd use level over welling? And then secondly to that, perhaps comment on the performance of Paris and Rome for dwelling and whether they're at risk of perhaps sort of closing?
Thank you.
Okay. In relation to Qatar and One World, yes, I think it's highly likely that Qatar will leave the One World Alliance. I've had regular contact with Akbar about this issue. He doesn't say these things without being genuine behind the comments. So he is annoyed with the way some members of OneWorld have responded to them as an alliance partner and he doesn't believe it's appropriate.
And as a result of that, I think this is a genuine, if you like, threat, potentially a genuine decision taken by him. It won't in any way impact on the relationship that we have and he's assured me of that. In fact, he's discussed this with me to make sure that we would be happy to continue working with him on areas of cooperation that we've always indicated would be potential areas where we would cooperate whether he was in the alliance or indeed whether he was a shareholder or not. So we see scope for doing that. In relation to the closer relationship going forward and what we could do, we've always looked at the option in relation to aircraft.
We've already benefited significantly on the short term basis from that relationship. The 13 A330-two hundred that Aer Lingus operated this year is the next Qatar Airways aircraft. Qatar facilitated Aer Lingus introducing that for the peak summer of 2018 by releasing it early. We flew that in the Qatar configuration. There were the aircraft was painted.
We changed the seat covers, but we effectively use the existing configuration of the aircraft. And you can see it's an extremely efficient use of capital to take an aircraft that you can introduce during the peak summer without any modification, a wide body aircraft without any real modification flight in their configuration and it's been very efficient. So we are looking at areas of cooperation like that. And that's one of the benefits of the relationship that they have a fleet of aircraft that complements the fleet of aircraft that some of our airlines have. They sometimes will have a surplus of aircraft that they're looking to pass on and those aircraft can be very efficiently used by us.
We're not giving specific detail in relation to CASK ex fuel today. But as I said, you should have confidence in us and Enrique demonstrated there in the 5 year target that we will continue to deliver improvement, technology, all the things that we're doing. We're always clear that we're not going to do that 1%. It's not going to be 1% every year. There will be some years when it will be more and some years when it will be less.
Next year, we have identified for you that there are areas of investment, BA being the case that you've seen there to celebrate the centenary of BA. It's a justifiable package of investments that BA will use strengthen the brand, to strengthen the customer proposition, to do all the things that customers want us to do and it's an ideal platform from a BA point of view to do that. But we'll talk more about specifics as we go in through the year and certainly when we release our full year results. And Level, I'll let Javier comment, but Level Vienna was an opportunity for us. I think it demonstrates the flexibility in the group and it's something that we will do where it makes sense for us to do that.
I think the performance of level in Rome and Paris and Javier, please feel free to criticize me or disagree with me if you like here. I think they're good and we're very comfortable and confident about the welling performance in Paris and Rome. There may be some other airports where you might want to consider some changes, but Paris and Rome I think are 2 that are working very well for you.
Yes, that's exactly the case. I mean, I think that it's good maybe to remind that in 2015, 125% of the results of Boeing was delivered actually in Barcelona. Right now, this is quite balanced. I have to say that in particular Rome, Fimicino, not only Rome, but also Florence, they're performing quite well. In France, we're performing quite well.
And I mean, without disclosing any number, but I have to say that in any region, we are making money this year. And I think that this is because the network strategy is also paying off in that that regard. So we are of course we make some fixes. So we discontinue some of the routes and we again, we redefine and rewire our network. But today, we've gained market relevance in those places and we're making money.
So that's
And one thing I would say about level and going to the question about pilots, which I didn't specifically address, I don't see that there's a shortage of pilots. There's definitely a tightening in the market. And for some airlines, it's particularly acute given that there aren't that many captains or qualified co pilots to be promoted. But one of the issues we've had with welding is, it's a Spanish language AOC. And therefore to recruit pilots, they have to be able to speak Spanish.
That clearly restricts you in terms of the market in which you can compete in for pilots. Level is an English language AOC or Anasec is an English language AOC, which is the norm. So to have ambition to be pan European, you have to have an English language AOC.
That's the reality of the industry that
we're in. The compete for people in that business, you've got to be able to facilitate recruitment in languages other than your home language. So that's one of the issues that gives us flexibility.
It's exactly one of the issues that we try to address. I think that we saw the opportunity when we were in the process of making an offer actually buying NICI and then you know what's had happened. And then we saw the opportunity. So we saw the market opportunity. There will be I mean there are a lot of people now in this market.
I think that this is going to a different end in the next month. And as Willie was saying, it was some also strategic value in the auction of Anisek because we are opening like a new window, a new opportunity for the market, but also as Willy was saying also to recruit pilots and to recruit people and that's the case that we are enjoying now.
Thank you. It's Jarrod Castle from UBS. Two questions on operating companies, just one on financial guidance. Just air lingers, just in terms of the returns it's getting on invested capital, unbelievable. Just thinking the next kind of 4, 5 years, what that means for competition, who kind of look at those returns and that environment, how sustainable are they?
On level, just in terms of when do you think we can get some targets like you get for the other operating companies or some kind of guidance where level will be in terms of contribution to the 2023 forecast for the group? And then just quickly on EPS, you've obviously increased your EBITDA average guidance by, call it, 10%. No change obviously to your EPS growth of 12% plus. But should we be thinking that you're more confident on the plus side given how things flow through? Thanks.
Stephen, I don't know where Stephen is. Yes, Stephen is here. Actually, I might ask Sean to comment on this given that he's the guy that's going to have to sustain it. But certainly, Stephen believes that the ROICs, not at the 28% and we've always said that, that has particular benefit in the current year. But these superior ROICs are sustainable given the model that they have and the focus that they have.
And we don't believe that this is, if you like, an invitation to new competition because they're operating in an extremely competitive market as it is today. But do you want to comment? And then Sean, do you want to maybe introduce yourself for those who haven't met Sean?
Yes. With regard to competition, I would make an argument that Berlingus is trading the way it is because of the competition. We've competed with Ryanair for 30 years and are doing so successfully. Every legacy, every local across the Atlantic competes at Dublin. So we've had to be very disciplined in how we've grown our business and we've done so successfully as you see, but in excess of 90% of our seats are already competed.
So I don't fear competition. I think it's actually helped to create Dublin as a hub, create an opportunity for us. And as long as we remain faithful to that which has got us here, I see the competition as having as much to fear from Erlingus as we have from any potential new entrants.
Thanks, Stephen. It's obvious Stephen has set a very high bar, which I'm very much up for the challenge. But I would echo his comments. If you look at I think as a strategy, nothing beats kind of demonstration of results and the results are phenomenal. If you look at the ability to scale the model, you've got great technology coming in the form of the A321.
You've got natural advantages at Dublin in terms of geographic position. And I think there's a lot of markets that can be built out to a more compelling schedule with the kind of technology solutions that we have in a way that's simple and efficient. So I think the strategy that has been outlined today for Erlingus is very compelling. I'm very confident that we'll succeed. And I think my focus will be on maintaining the quality of execution that Steve and the team have brought to that strategy over the last couple of years.
Thanks, Sean. On level, we'll include specific guidance on level at next year's capital And we may give you some flavor of it through the year, but definitely by Capital Markets next year. Although we are consulting on whether you want to have a Capital Markets Day next year. So we don't have one next year. We'll still give you something around this time next year on the level performance and level targets.
But what we've always said is that we wouldn't have started that business unless we were confident that it could achieve the targets that we've set for the airlines in the group. And that confidence remains, but we'll talk more and give specifics. And I know that he is keen to do that and to compete for more capital, I think is what I heard him say, and be the favored child next year.
It is more of flavor on our figures. So remember, we are keeping ROIC type of guidance goals planning goals. We are keeping the operating profit margin guidance as well. We are growing slightly above. We'll be having probably additional CapEx.
So the combination of those facts will be creating ability to improve EPS target. Our headrooms probably will appear today slightly more comfortable than last year. But we are not changing the pattern, maybe assuming a slightly more comfortable level of headroom.
Stephen Furlong, Davy. So two questions. I'm just wondering how you think the industry over the next year or so is going to pay for fuel either through fuel surcharges maybe or weaker players putting capacity? 2nd question is how important is the investment grade for you? Would you be willing, for example, to go below that for the right inorganic opportunity, for example?
Thank you.
Okay. On fuel, we're pleased with the way the industry has responded to the fuel price increase. If you look at that at an industry level, obviously it's been better for some airlines within the industry. But ultimately, you hear everybody saying the same thing. Fuel is something we all have to pay for and that has to be paid and reflected in the ticket price in some form or another.
What we are seeing is, while it may not be in the fair, it's through ancillary or a combination of both. And that's there's more and more evidence of that, that it's being recovered through some form of additional revenue generation. And in fact, there's probably more evidence to suggest that people are targeting additional ancillary revenue to offset the increase in the fuel. We really don't mind. As we see it, it's the total revenue that we're interesting in interested in how we do that can be different from airline to airline.
But we're pleased with our performance and we're pleased with what we're seeing from an industry point of view as well. And on investment grade
Yes, we are keeping this concept of investment grade zone. That's the one we had before. Now we have had a ticking of the box type of element. But the concept is the same. And being frank, we have been having an open conversation with these rating agencies because our intentions are public.
And the way we operate in these situations is a grace period, okay? So if you are sticking to your medium term goals in terms of investment grade, but you need to go through or beyond certain levels on our metrics through time on a temporary basis, we'll keep your rating. If you don't comply with the expectations, then we'll act react.
So it's not something we die in a ditch over. We think it's good to it does reflect the performance of the business. And I think credit to the treasury team who've engaged with the rating agencies to do this. But as you know, most of the debt that we've raised is asset backed where the credit rating has not been significant. It's the rate if you like the credit the assets rating more than anything else that has been relevant.
The holding level, it does make a difference.
Damian Brewer, B. C. Two questions. First of all, coming down to cargo. I mean, historically, the industry has largely lost control of cargo to freight forwarders who will make their own sort of 5%, 7%, 8% margins on it.
With what was described today, how much scope is there to reclaim that ground and take that margin back into IAG around on to 3rd parties? And then the second question on the passenger side, within the presentation, I noticed the Iberia NPS was 30, Aer Lingus was 47, and at the end of last year, you disclosed a group wide NPS in the teens. So clearly, there's another performer in there. But also when I look at the Iberia slide, you've gone you've switched EBIT by about €500,000,000 as that's gone from almost nil to a 30 NPS. How much opportunity is there within the underperformance, whether it's BA or Whaling to mirror that kind of performance going forward as you get the brand positioning right, you get the digital product right and you get the sort of product to market right?
Yes. I'll let Lynn comment on the cargo. Let me address the NPS. You're absolutely right. NPS, the way we measure it and we debate whether we measure it because we weighted to passenger numbers.
So therefore, if you like, it's more weighted towards the short haul and non premium. And therefore, the likes of Welling has a big impact on the MPS, the global target. And as Javier has said, the correlation between on time performance and positive NPS is almost perfect. And because of ATC issues, welling's on time performance has suffered. They're actually doing better than the competitors, but the customers aren't really interested in that and they don't really want to hear that it's not our fault that it's ATC.
So, again, that can be corrected. But I'm very confident that the investments we're making and the work that BEA is doing, for example, will respond very positively in NPS performance and we're already seeing that. I commented that the 3rd quarter results, the area of greatest improvement is in British Airways across the group when we look at it. And the performance is very much aligned with the targeted investment and we expect that targeted investment to continue. So I'm very confident personally and I know my confidence is shared by Alex.
I can't see where Alex is at the moment there. But I know Alex shares the confidence and in fact he's probably more confident than I am given that he's living this day to day and we measure NPS on a daily basis, on a flight basis, on a route basis. And it is a valuable tool that I think we are exploiting extremely well and does help to focus and balance the debate that we have around the management committee. Lynn, do you want to comment on cargo? We've talked about cargo a lot in terms of the structural difference between cargo and passenger where there is definitely an imbalance between the supply of cargo space and the demand for cargo.
But specifically in relation to Yes,
in terms of freight forwarders, I mean, first of all, we have very strong relationships with the freight forwarders, the customers of ours are sources of a lot of our revenue. And I'm often asked, do we see freight forwarders in the same way, as example, travel agents in the passenger side of the business. And I do think that freight forwarders play quite a unique role in many respects. They deal with aspects of shippers logistics that we as air carriers wouldn't want to deal with. They consolidate freight that we wouldn't want to be consolidating.
So I think there's a role for the freight forwarders that
will be
sustainable and they will continue to add value. What I do think will change is the way in which technology makes that added value of the freight forwarders more transparent. I think there is some opacity in the way that contracts are signed and prices are generated today that technology will put a spotlight on. And I think the challenge for the freight forwarders therefore is to be able to identify and justify the added value that they do in the chain. But I see your relationship ongoing with them.
Okay. Thank you.
It's Roshica from Barclays. Three questions as well, if I may. The first one on level and to use the terminology that you used in that it's not an airline, it's a combination of production unit and production modules and a brand. I guess that makes a lot of sense right now in that it's allowing you to scale up very quickly. But if we were to fast forward 5 to 10 years, is that sort of model likely to then have too much complexity and will need simplification to being just an airline?
I'd be interested in your thoughts on that. The second one on Aer Lingus, can we just get an update on where we are in terms of potentially joining the Transatlantic joint venture or not and when we are there? And then thirdly, on Boiling and to come back to the topic about air traffic control, capacity constraints and so forth. I understand that you've obviously slowed down the rate of growth for next financial year, but how come you haven't done that for the 5 year period? These sort of problems don't seem to disappear overnight, airport capacity constraints, air traffic control capacity constraints are going to take years to fix.
And so therefore, why haven't you changed the 5 year plans of dwelling? Thank you.
Okay. I think the level model and as Vinhie described this, it may appear complex on paper. It's actually relatively simple in operation, certainly from our point of view to date. And it's a model that was debated quite significantly well before Finney joined us. So we debated the structure of the AMC and multiple operating companies or multiple AOCs providing lift.
We think it works. We think we can manage this without too much difficulty. But obviously, the great thing about it is we can test it. If it doesn't work, we can try a different model. And I don't know, Vinni, do you want to comment on this?
But certainly based on everything we've seen so far, it's a very efficient model that allows you to move quickly into markets and allows you to move very efficiently where opportunities exist and does give you opportunities in terms of traffic rights that wouldn't exist with a single AOC or may not exist with a single AOC. And we've seen that in the low cost model as well where there are low cost airlines with multiple AOCs to take advantage of some of the traffic rights. So our industry can be a bit complex at times and sometimes we put structures in place that would appear unnecessarily complex, but they're actually designed to give us opportunities and that's what we think the structure will do for us.
I think you explained that extraordinarily well, Willie. I think the one piece that I would probably add on the top, I call it production units for a very specific purpose, which is that it's not necessarily an AOC. It is just a different way of approaching part of the production equation. If you like, if you look at a different airline type structure, what you see is that airlines build bases of different sizes in different cities under the same AOC, but it's not a dissimilar concept. By keeping the production units small, we encourage competition between the different units, but also we ensure that the management of those units is able to have direct personal relationships with the individuals who are flying as part of that operation.
It gives you better management control by having reasonable sized units sitting underneath it. And so for that reason, I really do believe that this is part of the long term structure for Level as we go forward. But as Willie says, anything which doesn't work in the way that we deploy the model, we're going to go back and change it and do something completely different.
At one stage, in fact, it's interesting, at one stage a couple of years ago, BA was operating with 4 AOCs. Today, it operates with 2 because CityFlyer is separate AOC to British Airways. So we have done this in the past and I think we know how to do it. In relation to Aer Lingus, we're waiting on the regulator. This is an ongoing process.
So it does require regulatory approval to bring Aer Lingus into the JBA. I don't have any I don't know if Chris, if Chris, if you want to comment, I don't have any view in terms of how long that is going to take. But the good news is it's not in any way distracting or preventing Erlingus fully exploiting the opportunities that they see outside of the JBA. And that's the way we're operating. So I think this will come into the JBA at some stage subject to regulatory approval, but it's not going to in any way slow down the plans that Arlingus has today.
No, I mean the only thing I'd add Willie is
a couple of things. The process of the DOT and regulators generally is becoming pretty onerous in terms of information requests and econometric data that sort of stuff.
So there's quite a lot
of work of that sort going on. And then obviously there's no statutory timetable with the DOT. So I didn't anticipate through 2019, but obviously to some extent you're dependent on the DOT and their own priorities.
And you heard Stephen in his presentation saying the relationship with JetBlue and the relationship with Alaska and they will continue and clearly aren't dependent on regulatory approval. And on welling, what we're doing and again Javier can comment on this, but to reflect the ATC problems that we've encountered, it's pretty predictable. It's more predictable today than it has been. And you heard Javier saying, we're using AI and machine learning to adopt a new schedule and change the network so that we can build in some additional buffers in anticipation of the ATC delays that we have encountered and are likely to encounter. So we're confident about the ability to grow.
It will be a different shape around the growth than we had in the past and that we had in our original plans. But Javier?
Yes. I will comment maybe a couple of things. Well, first is, when we look at our operations, it's our operations are different depending on how the way we the network is shaped on where are we flying to, where are we flying for. So, for instance, in Barcelona, we have similar punctuality like the airport, but in places like Bilbao or Sevilla or the Canary Islands, we have 80% portability. So, it's different depending on the environment you're facing to.
So, what we are doing is by reshaping the network and first, we are taking into consideration those places. And while when we are talking about when we are thinking about growing, it is true that we are factoring that in. It's not that we are growing in the same places maybe that we were be growing in a different ATC environment. And the things that we are doing it are very simple. I mean, in fact, we are when we said that we are building some resilience into our operations basically that we take the pain points of our networks and we put some buffers there.
Some buffers sometimes is that we need to operate these with more crews or is that we need to have a turnaround time that is a bit longer. That's the kind of investment that we are referring to when we're saying that we're investing in building resilience in our operations.
And one of the advantages we have, Eamon Brennan, who's the Director General of Eurocontrol is very open sharing data with us. So we've got a much richer data available to us, not just our own data, but data provided by Eurocontrol, which identifies the bottlenecks and has given us the ability to look at what happened, not just our own operation, but to others as well. And they're assisting airlines in predicting where bottlenecks are likely to exist as well. So we've a lot more information available to us to address this. It still tells us we need to scale back the growth.
And in some areas, we're not going to pursue growth in certain routes, if you like, because we know that they're the ones that are going to be particularly hit. So it's a different shape of growth that we'll pursue, but certainly we're confident that we can manage that.
Our next question is from Daniel Ruska.
Thanks. It's Daniel Ruska from Bernstein. I'll say on consolidation and maybe have a multipart question. It seems a little bit with fuel high capacity growth still continuing, you're keeping the pressure on the market and banking on some consolidation out there. Could you comment a little bit on whether you see consolidation and disruption from consolidation more likely among bigger carriers, so let's say the top 15 out there or rather in the long tail?
And which of those 2 benefits the group more? So what will you be looking for? Maybe also just a brief comment on what would need to change, what you'd like to see with the ongoing, let's say, discussion with the Nordics or the not ongoing discussion with the Nordics and what's happening at Norwegian? And lastly, since it's
presented level a little
bit as this new operating model, a virtual airline, do you consider that to be a potential vehicle for consolidation? Some of your how Level or if Level fits into that consolidation game for you? How Level or if Level fits into that consolidation game for you?
Yes. No, we don't see Level being one of the instruments we're using in terms of consolidation. Level is for organic growth and we're very clear. So it's a simple focus that we've given the team. This is an organic platform to grow into markets that we believe are attractive, that are currently underserved and where we can compete in a profitable manner.
In terms of consolidation, what's been helpful from an industry point of view with the failures of the number of the weaker carriers, it does benefit us marginally. So the collapse of Primera and Cobalt had a very slight benefit to us directly. So in the case of Cobalt, we added capacity from Heathrow to Larnaca. I think a second service, second daily service, so replacing the capacity that they would have had. And clearly, that's a positive for us.
Primera, there was a little bit in the markets, but it didn't come as a surprise to us that they failed. I don't think it came as a surprise to anybody that they failed. So seeing carriers like that have tried to talk big, but actually do very little disappear is definitely a positive. So consolidation I think is going to take place in many forms. I think there will be some M and A activity.
I think there will be failures. They will principally be the smaller airlines on the regions. All of this benefits the carriers within the group and gives us opportunities that we're in a position to exploit. The one thing I would say, and I think so we said earlier, I think this is the 8th Capital Markets Day for IAG and I did 6 for BA. And I think every single one of those people expressed concern about capacity.
So this isn't a new theme. And I think during every one of those we said we're confident and we're comfortable with the capacity that we see. We're very comfortable with the capacity that we're putting in the market because you can see where we're putting it. It's targeted. It's in areas where we've got proven opportunity and it continues to deliver above industry returns whichever way you want to measure that.
So we're very flexible to be able to adjust capacity and that's one of the beauty of IAG. I think we're probably going to be faster than anybody given our experience to respond to what we might see as a weakness in demand or increases in demand in certain markets. And that flexibility is absolutely key. And you should expect us to continue to fully exploit those opportunities and to adjust capacity. But people expressed concern about capacity last year and look at the performance of the business.
They expressed capacity concerns the year before and look the performance of the business. So we're not putting capacity in there because we think there's an opportunity to grow. We're putting capacity in there because we think there's an opportunity to grow profitably. That's the difference. We're very focused on the returns that this capacity will generate for us.
And in the presentations that you've seen, I think you can appreciate that is very targeted capacity growth into markets where we know very well and where we know we can deliver continue to deliver the returns that we've been delivering. So in relation to the Nordics, I have nothing new to report to be honest with you. We continue to watch. We continue to have an interest. But obviously, as I said before, the interest wanes over time and we'll wait and see.
But there's a lot going on there. I'm getting sort of updates on an hourly basis now. I don't know who keeps sending them to me, but people keep sending me updates in terms of what's happening. So there's a lot happening in that company and it's fun to watch. But I've nothing new to add to what I said earlier.
We believe when we talk about consolidation, it is an opportunity, particularly if you look at the short haul network and for the consolidation in that short haul network, it's probably the best opportunity for us. But we would only do it if we felt that that would generate returns that are that can match the returns that we've set for the airlines in the group. So nothing new to say. We'll keep you informed if there are any developments, But at this stage, I have no new news.
Neil? Thank you. Neil Glynn from Credit Suisse. If I could touch on 2 topics. The first one may be following on from the profitable growth forecast or sorry, focus.
On your long haul business and thinking about route selection going forward, there was an interesting slide earlier on where you highlighted of 97 long haul routes, 70 of them are non overlap routes. How do you think about selecting routes going forward in terms of maximizing your hold on a market and the margins there from? Should we expect more overlap from OpCo to OpCo going forward? And then the second question on the distribution strategy. I guess we're a year on from the change.
Can you help us understand the 2% unit revenue growth so far this year? To what extent that was influential there? And as we think over the next 5 years, should we expect linear improvements? Or how do you think about the profile of distribution strategy improvements? And finally, on that same theme, do you need to make a decision soon on the booking engine's future in terms of what it looks like?
On the booking engine, no, we don't need to make a decision. So, on
that, there's a lot
of work. Robert touched on some of that last year and he hinted, but there is work going on behind the scenes. But we don't have any immediate need to address anything in terms of booking engine. I'll go back to the route overlap. Actually, there's potential, particularly on the North Atlantic.
So some of the destinations that Aer Lingus actively pursuing are already served by 1 or maybe more airlines in the group. And some of the destinations that they're looking at, while they're not currently served, could also be of interest to BA for example, because as I've said on many occasions, there are many destinations in North America that we believe we can still serve either from Dublin, from London or from both. But at the moment, I'm thinking I'm trying to think through Stephen's list of airports. Most of those as you've seen before are in the but actually not all of them, but most of them are in the sort of Northeast of the U. S.
And mid they're all over the place actually, Steven, aren't they? But with the A321, you've seen the range profile of that aircraft. So you can see where the but in the process of going out to airports in North America to see what interest they would have in a direct service by Aer Lingus, Actually, we were surprised at the number of airports that came back that were outside of the range of the 321 that expressed a strong interest in having a direct service to Dublin. And there are some that are being actively considered by Aer Lingus. And that's why Stephen mentioned further growth in the 330 fleet as well, because there's opportunity there and some of those destinations are already served by BA.
But we know we can do them and we've demonstrated this, we can do this and be profitable in both. So I think it reflects both the nature of our business, serving the different customer segments, feeding people over the different hubs in different ways. On distribution strategy, the it has had an improvement. I don't know, Robert, maybe you want to comment. It has had an improvement on the unit revenue.
It's not what I would consider to be something that would be significant at this stage. And it shouldn't it probably won't be linear, but
Yes, I'd agree, Willie. It's there is a beneficial effect, but probably pretty much in the noise of what you would see. The area where we've had some more measurable upside is around the ancillary sales. The changes that we've made, we've seen some good shifts towards our growth of our direct channels and that comes with a better opportunity for us to drive ancillary revenue. In terms of the shape of the change, as I mentioned earlier, we've been quite careful to try and make sure that this is a transition that happens, but happens smoothly.
So we would expect the same to continue growth in that channel, but happen in a way that isn't causing warfare.
It's Alex Patterson from Investec. Three questions, please. Firstly, load factors are very high by a historic standard. Is there much more that you can achieve on that? Is there an optimal level that you can target?
Secondly, in terms of allocation of capital, should we assume that you allocate capital in a way that the returns ultimately converge across your airlines? Obviously, in the short term, you've got other reasons to invest in BA. There are capacity constraints in other areas. But ultimately, would you expect that to be the case? And lastly, would you be happy if the Italian State Railway, and if you excuse my Italian, for Ovidello Stato invested in Natalia.
Okay. I used to say that probably the Italian post office was a better investor than Etihad and Italian Railway is probably a better investor than the Italian post office, but it's another one of these Italian solutions to an Italian problem. So we're staying well away from it. The good news is that the more the longer this goes on, the more opportunity there is for us to pursue an organic growth plan and we're doing that and it's been very positive for Boiling initially. Load factors, there is scope for higher load factors.
And I think certainly Alex commented on this in terms of the BA performance both at Heathrow, the Gatwick load factors I think are pretty good, but there's some scope there as well. And indeed at London City, I think there's some scope. So I and I know Stephen has talked about load factor opportunity at Erlingus as well. And so, I think there's definitely room for us to get a better performance. I do always caution people when they look at our reported load factors against some of our low cost competitors, we report on a different basis.
And this is one of the things we have talked about. So the likes of Ryanair report on sold seats, whether they're occupied or not. BA only reports the commercially occupied seats on the aircraft. So it's not a like for like comparison, but there is definitely scope for BA to improve short haul seed factors at Heathrow in particular. And I think that reflects the shape of the network that BA has been pursuing at Heathrow as well.
And capital, do you want
to talk about capital? Yes, convergence, yes. Yes, of course, we seek convergence of returns on our different capital allocation positions on companies, on new projects, etcetera. But at the same time, we leave time. The moment to reach those levels of required returns may vary and it does vary very significantly.
And it's on purpose. When we do that is because we have a target to accomplish. And after the target is accomplished, better term will come.
It's Andrew Lobbenberg from HSBC. Can I ask on BA and the and Alex's fancy new seats? What's the timeline on getting the fleet embodied? Because to make it commercially valid, as a marketable thing, you'll need to get them in quickly and then now it costs
a lot of money and you'll need to
take planes out of service. So how does that play out? In terms of network, there's remarkably little discussion through the day in terms of Asia. I don't know whether it's something to do with your strange fixation on profitable growth, I don't know. But
a lot of people there,
a lot of growth there. So how does Asia play into your thinking? And just in terms of the return on capital work, what changes with the IFRS 16 and then changing of the capitalization structure? So you're going to give us complete new sets of numbers at some stage or how does that play out? Thanks.
Okay. Alex, you can comment on the seats. The one thing we know about seats is that seat supplier, yes. So we have a program that we believe is deliverable and we're staying in close contact with the seat manufacturers. But we're and again, we've learned from the mistakes that others have made where they roll out with big fanfare the new seat that then nobody sees because they haven't been able to deliver it.
But Alex, do you want to talk about your plans?
No. And this is one of the items that we struggle the most. We need to make sure expectations are managed correctly. This is not going to be a quick rollout. It's over 100 wide bodies that need to be reconfigured.
So we will see probably at this stage and finalizing the tail end of the plans, the last aircraft being done in 2023. So, yes, bulk 2020 2021 beginning in 2019, but there will still be some aircraft in 2022 and probably a few remaining in 2023. This is a manufacturing issue more than anything else. If we have the seats ready, we try and install them very quick and we're ready to put aircraft on the ground to make those installations, but it's more of a supply chain issue
at this time.
And on Asia, yes, you're right. Like Asia is about 8% from a group point of view of our capacity. It's principally BA and it's from memory, Sean, you could correct me if I'm wrong here, it's about 13%, 14% of BAs, ASKs. But I think in the presentation there, you're looking at 5% to 6% growth in Asia. So we're not ignoring it.
But I think our experience with Asia where we've sort of dipped our toe into the secondary city markets in China has not been very encouraging and therefore we're not saying we won't do it, but I think we're more cautious. We have launched Osaka. I don't know, Sean, do you want to given that this is still one of your areas of responsibility until Yes.
Indeed. And I think Osaka is launching next April, 4 per week. And as an example, the 788 opening up kind of markets that wouldn't have been feasible 5 or 6 years ago. You got to remember as well, we successfully reentered Seoul and Kuala Lumpur in the last 4 years. We've added more frequency to Shanghai.
I think the big cities in China as capacity in airports opens up, we would look to build in more frequency and more depth schedule there as well. And our plan does include about 5% to 6% growth and that will probably include another new destination on the map, a number of which we're evaluating.
Okay. And was there a third question? On IFRS 16? IFRS 16, yes.
Well, some preliminary findings, which are encouraging. On one side, our leverage, so our debt ratios that we were using pre IFRS 16 adding to the balance sheet level of debt, a multiple of the rents to undertake a notional amount of the operating leases. So general practice that was the old days. The new days with a new accounting model for operating leases the figure is going to be very similar. So liability size is going to be similar.
Leverage is going to be similar. The asset base that we are going to be using is going to be similar. We still have to make a final decision on the specific metric that we are going to be making for ROIC. Again, the preliminary outcomes is about very, very thin range between the different options. So we don't see nothing exceptional happening.
It's more about continuity of the type of figures that you have been seeing
today. And we love debating this one. We spent hours and hours at management committee. I wish I'd recorded it because it's a fascinating discussion. Been more time spent debating IFRS 16.
And it's great fun. We love these accounting changes.
Thanks. Gerald Khoo from Liberum. 3 for me, if I can. Starting with level and the sort of virtual airline, what consideration has been given, if any, to using AOCs or production units that don't sit within IAG. Certainly, was talk about Air Lingus using A321LRs, transatlantic and then turning them to use them on short haul.
The immediate thought is the other airline that can do that is JetBlue and there have been suggestions that it might be looking at Transatlantic. What are your thoughts in terms of them as a competitor or potentially a partner instead? And finally, on Gatwick, following the acquisition of the Monarch Slots, could you elaborate a bit on what the sort of longer term strategy is? Clearly, in the short term, the focus has been on slots utilization in terms of short haul flying. Is there presumably there's more to it than that over the longer term?
Yes. We already use other airlines provide capacity. Aer Lingus does this with the 757s which is in effect a wet lease providing capacity on the transatlantic for Aer Lingus. BA has used and will use at London City some airlines provide. So it's not a new change.
So it's not necessarily a model that's level is pursuing because there's other opportunities. But there's we've no objection to using capacity provided by somebody else, if it makes sense. You've got to have the right relationship. I think the Aerolinguist example of the 757s is a perfect relationship. It works extremely well.
Our experience is that these can work well in the short term. Getting one that works well in the long term is a challenge. But we have franchise operators in Aer Lingus in Iberia and these are long standing and have been very efficient and successful relationships. But over time, those relationships can become stressed. So on a short term basis, it is an opportunity and we would use this.
JetBlue, I'm going to ask Steven to comment on this because Steven has a very good relationship. We know the JetBlue people very well. We've listened to their comments about TransAtlantic for several years now. It's been anticipated that they might do something. But again, it's just a well, Stephen, why don't you comment?
Thanks for that one, Willie. As Willie said, we've had a very long standing relationship with JetBlue and it's of mutual benefit, reciprocal benefit. And that's why I think that whatever decisions JetBlue may or may not take, I think the likelihood of being able to maintain a commercial partnership with them is high. There's a small matter of 200,000 guests that we exchange between each other. So we've been helpful to JetBlue at Boston for example in building out their ambition at Boston.
We have co located terminals. We have strong relationships across our businesses. We would look to continue to work those relationships. And I'm pretty confident that they're of a similar mind.
Yes. I would say JetBlue is not a low cost operator. It's a good airline, good brands, good quality service. But I don't think there's anything there that we should be concerned about. We know how to compete and we know how to compete with new entrants, existing entrants and pretty much anybody else.
So if they do, there's certainly room for them. It's a good market and a growing let Alex and Sean maybe comment on this.
Sure. Just to confirm that, yes, as I mentioned earlier today, we will look at some a There's a particular type of market that has been served there for a long time. We know it quite well. So we'll continue to work on it, both short haul and long haul. However, you will see us flying all of a sudden to Cape Town or New York from Gatwick.
So there are opportunities to optimize the whole network including Heathrow at times complementing Heathrow with some of those destinations. It is amazing how we're flying to 3 different airports into San Francisco, 2 different airports in Miami. Yes, you can go to Fort Lauderdale, come back from Miami and given that flexibility in the schedule helps a lot. So, primarily leisure and secondly complementing the product from Heathrow.
Hello. It's Gaehn Sempaei from Caixabank PPI. If I remember well, BA was the launching customer of Amadeus Airline IT Systems. And in one of the slides, you mentioned the possibility of working with no PSS at all. How do you see your relationship with this large GDS airline IT players evolving in the future?
Yes. Yes.
And the second question is now a different topic. Compared to last year, you're stepping up the capacity additions, whereas full price is also higher, which theoretically would mean that some of the routes became less profitable, which would mean that you probably are more optimistic regarding demand? Or is there the level of growth? Or is there any other thing?
Yes. On GGSs, we believe there is a role for GGSs going forward despite all the changes we'll make. We want to have a relationship with them. What we've said and we've been very consistent on this is the relationship can't be one that's based on the historical relationship, which doesn't work. It doesn't work today and certainly won't work in the future.
So we've been encouraging the GDSs to respond to the changes in the market and to respond to the needs of our customers and of the airlines and to do business with us in a different way. I've been pleased that actually the response has been better and more constructive than I had expected. My concern was that they would dig their heels in. They have actually responded and are working reasonably well with us. And we want to have a relationship because we know that for distribution on a global scale, we do need to have some reliance on GDSs and we want to continue to work with them where it's relevant to us, but not based on the relationship that we've had in the past.
So I see a role for them. I see hopefully constructive dialogue continuing with them. But ultimately, we're very clear in terms of where we're going and we want them to come with us on that journey. But if they don't, ultimately, it's a journey that we will pursue on our own. But I expect them to continue to work with us and to join us on that journey.
The fuel is extremely volatile. We were just looking I think the forward curve is
The forward curve for example for
the 5 years ahead, the years of the business plan is yesterday $6.99 per metric ton of Kerasen, which is by the way the figure that we have used on our assumptions. But on a type of short term basis, the wave has been moving. It has been absolutely incredible. In the last 2 days, fuel prices and chemical prices have been falling by 4%. So it's really difficult to make assessments to plan to manage.
So that's why the hedging program has a huge sense. We need to move on this type of behavior because it may not become unmanageable. So for the purpose of the plan and the short term, we are comfortable now with the assumptions that we made 700,000,000 maybe slightly higher in the 1st year. That's where we are and that's the type of fuel cost increases that we have been suffering in Q3 or Q4 and we know how to manage them. So of course, if we were doubling the price, we'll have a huge problem and some opportunities.
For the time being,
we are there. But as I pointed out earlier, if you look at that period 2010 to 2017, at an industry level, fuel was 27% of the industry's cost base. And that was the most profitable period in the history of the airline industry. So the industry can adapt. It takes us a little bit of time, but we can adapt.
And during that period, there was very strong growth in the industry as well. And the And that's in the face of questions about fuel, and that's in the face of questions about fuel, the economic environment, everything. There's still that's their that's not the high case scenario. That's what they consider to be a business as usual scenario factoring in the high fuel price. So we're confident that we can manage in that environment and we can manage well.
Just a follow-up because my first question was not exactly related with the GDS, but more with the airline IT part of the GDS. So what's powering the MDC platform, not how is the flights distributed to travel agents? Sorry, I missed that, Anders. My first question was more related to the airline IT part of the distribution, not with the distribution itself, not with how do you are you going to deal with the GDSs, more how are you powering your LNG systems to continue working with the GDSs or not?
Yes. We're doing a lot of work, Glenn, who's up behind you. I don't know, Glenn, do you want to comment on this, but this is an area where we're spending a lot of time and considering how we change our business model and how we exploit technology that's existing today and is likely become available to us in the short term?
Yes. I mean, as Robert put a chart up today talking about just the opportunities around that, NDC is one component looking at the offer. And the next phase and across the industry is the order component, which is what you classically know as the passenger name record or the PNR, that six digit reference. I mean, what we're aiming across the industry, and it is an industry effort, so it's not just IAG as a group, we're leading that. But it is looking at how we can move us into the more retailing aspect.
You're seeing the ancillaries growth, all of those areas. And that's key target area that we want to address over the future.
Okay. I'm conscious of the fact that we're easing into the time that we have available for some drinks and
Yes, absolutely. Thank you, Enrique and Willie. Thank you to all our speakers today. Thank you all for coming. Special thank you to our organizers today, Angela, our newest team member and Sarah, who I know some of you know.
And thank the rest of the IR team of David and Arany and the strategy team. We're serving drinks outside, so please do join us. Thank you.