All right. Good morning, ladies and gentlemen. I'm very happy to welcome you to this IAG second half result presentation. Let me share with you that the board is very pleased and very happy with the management for the strong result of both the second quarter and the first half of the year. IAG is one of the only few airlines worldwide to report an improved operating profit compared with a year ago. While most of our peers are still reporting decline in the operating profit, IAG is reporting an increase to EUR 1.1 billion from EUR 950 million in the first half of 2017. Demonstrate our commitment to increasing shareholder return. On the back of strong profitability, we commenced our second EUR 500 million buyback set in the month of May. We are already more than halfway through.
I'm pleased to announce, as well, the election in the last AGM in June of a new board member, namely Deborah Kerr, who brings very valuable technology skills, as well as a knowledge of the airline industry and a huge exposure to the U.S. business up here and Spirit Airlines. I thank you for coming, and I hand over.
Thank you, Antonio, and good morning, everyone. I'm pleased to say, as Chairman has said, we're making good progress. Good set of results for the quarter and for the first half. We're delighted to stick to our guidance, which we'll talk about later on. Despite the ongoing challenge of the higher fuel price, EUR 151 million up in the quarter. We're also making good progress against our strategic objectives. We launched LEVEL out of Paris on the 2nd of July, currently flying to Montreal, Guadeloupe. Later on, we'll increase flights to those destinations and add Martinique and New York. We also launched a LEVEL short haul out of Vienna on the 17th of July. We will have four A321s based in Vienna this year, operating a network of 14 destinations from Vienna. We're very pleased with the performance of both of those new initiatives.
Our forward sales are tracking ahead of our plan. We announced also the appointment of the first LEVEL CEO. We ran the airline for a year without a CEO, and it was very successful. Let's see what happens in the second year. No pressure on our new colleague who gets the captain's hat today. We continue to invest in the product this is going to be a feature of our business for both Iberia and British Airways. particularly in the premium cabin and with the addition of the A330 and Iberia. We're growing on our networks, 10% growth in ASKs on the trans-Atlantic in the second quarter. Half of that is in Europe, which are performing incredibly well. Nashville is absolutely stunning in terms of its performance. British Airways launched Philadelphia and Seattle and are already looking at San Francisco. Seattle to a daily service.
Iberia launched a new service to San Francisco. Barcelona, with LEVEL, switched from San Francisco to Boston, performing fairly strongly as well. We're also adding capacity on Latin America. The economies there are strengthening. We'll see the uptick in the Brazilian economy. Significantly, expansion at Gatwick through the acquisition of the Monarch slot with 15% growth there. Vueling has done quite a bit on its network. The common platform is proving to be very effective. We've seen a good performance of controllable non-fuel unit costs in the half and in the quarter in particular, a good performance. We're now down 11.7% versus our cost base in 2011, when we formed IAG. We're adding new aircraft, which are fuel efficient and will give us increasing benefits going forward. Very pleased with the rollout of our new distribution model. That's been better than expected.
All in all, progress on all of the key strategic issues for the group. In terms of the financial performance, and Enrique is going to take you through a detailed presentation on this, but you can see our financial targets are all either being exceeded or at the half year point, certainly well within range for the full year performance with ROI in the half year and the trailing 12 months base, 16.2. Very good performance group. I'm pleased with what we've achieved so far. I'm very optimistic about the half year, continuing optimism in the group for five years. I'll hand over to Enrique now, who will take you through the detailed presentation for the quarter.
Thank you, Willie. Good morning, everybody. Again, restating what has already been said. We've been making in this quarter EUR 803 million of operating profit before exceptionals. This is a very type of EUR 835 million. This is a very significant improvement against last year. It's, on an outcome basis, on a simple comparison, EUR 45 million. If we take into account the different Forex environment that we have had last year and this year, and the negative impact that different Forex environment has had on our transaction and translation, Forex impact, the basic difference, the basic improvement, gets to EUR 111 million. This is on a quarter where we have been basically having to deal with some significant challenges. As we have been explaining, on one side, Easter holidays have been falling in a different way this year, 2018, than last year.
This has, of course, created some differences in margin generation and profit generation for some of our companies, especially companies as Vueling or Aer Lingus, or Iberia with a significant seasonal impact on their production pattern. Also, as you know, it's fuel price. Fuel price has been increasing very substantially. We have a high level of hedges. We are around 75% of our expected consumption for the year already hedged. But of course, if we move from USD 500 per ton, that was the level of last year, to above USD 700 this year, that makes a significant challenge. The other one has to do with ATC disruption, basically related to strikes, and very specifically European French strikes, which have been affecting very particularly, Vueling, especially Vueling and its operations. We have been making a deep dive in the direct impact on their cost base.
We'll be reaching a figure of around EUR 20 million, which is very substantial, and basically, as you will see afterwards explained, most of the weaker performance of Vueling through Q2 2018. When we get to how we've been producing these operating profit level figures, it has been through a growth in terms of ASK of 5.8%, which has been provoking a demand improvement on our planes, on our flights, of 7.6%. This means we have increased our seat factors all over our network. This means that basically, we are facing demand on our main strategic markets, which is growing ahead of our capacity.
That's a very positive and important signal for us and for the way we are growing, because at the same time, we are improving passenger unit revenues by 2.6%, which is, I would say, a very substantial improvement, taking into account, again, this quarter two has been suffering because of different Easter holiday calendar. Very happy with this 2.3% improvement, and also happy because what we are seeing in terms of signs on our booking profiles for Q3 especially, is basically showing a very type of aligned improvement into the next future. Worth to say, our non-passenger unit revenues have also been growing. Our revenues have been growing significantly above the ASK growth figure. Our total unit revenue has been improving by 2.7%.
This, as I will explain, has also an impact on how we calculate our costs, our non-fuel costs especially, because part of this additional revenue growth is not related to our ASK. It's not related to our flight operations, and it brings costs on our cost model, which are not related to ASK. It's having to do basically with Iberia third-party MRO business, or British Airways Holidays, or Avios, or others. That's something that we'll try to explain how it's been impacting to us in the quarter. On the cost side, basically, we are showing a -2% on non-fuel unit cost performance against last year. Of course, it has to do with our underlying performance, but also to the positive comparison against the disruption, the blackout that British Airways was going through in June last year.
A significant amount of the cost reduction has to do with this fact, is one of facts that affected our figures negatively. We were very clear it was EUR 65 million last year, Q2. This year, we have had also these, I would say, non-transport costs growing and our own disruption costs having to do with ATC strikes. If we reach for a cleaner underlying figure of improvement in terms of non-fuel unit cost, which we will be reaching a figure that surpasses clearly the 1%, maybe in the range of 1.5%, which is very well aligned with our medium and long-term target in controlling our non-fuel unit cost base. Finally, fuel costs.
Fuel costs have been dragging our results and our margins in this quarter too, they represent an increase in constant currency and unit terms of 15%, as you will see later on. As a whole, we explain here how the bridge of operating profit is flowing from the figures last year into the figures this year. If we take the adjusted of IFRS 15 figure, which was EUR 790, and we include the negative impact of Forex this quarter, which is EUR 66, we get the regular rebase for the results this year. On that type of regular rebase comparator, we've been generating margins and profits through growth, EUR 46 million. Very substantially through the management of our passenger and non-passenger unit revenues, EUR 1 50 million. Very substantial improvement on our unit revenue base and on our other revenue sources of business.
It's the fuel cost, which has impacted negatively on a constant currency unit ton base, by EUR 186 million. If you compare passenger revenues, non-passenger revenues, and fuel costs, you can acknowledge how we've been offsetting, we've been countering, we have been basically mitigating the significant impact on the cost, fuel prices, through improvement on the revenue side. The proportion is very high. It's very high, especially for the quarter that has not been benefiting from Easter holidays. Finally, again, a very important and positive role being done by the management in managing non-fuel costs, which has created an improvement in terms of EUR 85 million, but that it's basically affecting positively, as you will see afterwards, all of our cost lines. It's affecting positively not only labor costs, but also supplier costs and ownership.
This is how it shows our capacity development to Q2 and our revenue development, unit revenue developments at the same time. Relevant to comment, basically North America. North America with a very significant capacity increase, 10% up against the last year, across the board. Half of this 10% is attributable to British Airways growth. The rest is basically the rest of our companies. Aer Lingus, Iberia, and LEVEL. Also, half of this increased capacity has been dedicated to new routes. The other half has been basically increased frequencies in routes that we already operate. Taking into account this significant growth, we value positively, very positively, just a small reduction in unit revenue.
If we take into account the proportion of total revenues that we've been able to grow on this quarter, it's around 10%, which is a very important figure, and it reflects, I would say, very similar revenue projections that we have been seeing in our competitors, especially in the U.S. side. Probably better than our European peers. After commenting North America, where we still see, I would say, positive trends coming through Q3, they are very much related to premium traffics, which are holding very strongly. We should be commenting Europe. Europe has been also a high-growth region, 5.1% in terms of ASK, unit revenues have been very strong. Capacity demand equation in inter-European traffics is still a very strong one, and it has enabled us to increase unit revenues by quasi 2%. Domestic is also positive.
I guess that the negative figure that we are showing here, slightly negative, has to do basically with stage length. A stage length happening in the Iberia network and in the Vueling network, and having to do with the increase in the peninsula to island traffic, which as you can imagine, has double stage length as the intra-peninsula traffic. This minor reduction in unit revenues with this domestic improvement of 8.3% means that we have been improving margins on that segment of our network, the same as Europe and North America. We see also continued strength on our Latin American and Caribbean markets, and that despite having to go through difficulties in countries as Argentina or Brazil. Traffics there, even in Argentina and Brazil, have been holding steadily. Unit revenues, as you see, have been improving there significantly with growth levels which are in excess of 6%.
Latin America is an area of our network, which is still performing very strongly, what we are seeing into the remainder of the year is showing similar trends. AMESA is also improving. Basically, we have been reshuffling our operations there, then getting to a better mix in terms of unit revenues. Asia Pacific maybe is the slightly weaker side of our network. It's a varied performance. I guess the negatives are mostly concentrated in Hong Kong, where a lot of, I would say, capacity has been deployed specifically by Cathay Pacific. Jumping into the cost side. Fuel, as you see in constant currency terms, has been increasing by 15%. The rest of our non-fuel cost lines have been reducing their unit cost basis, in some cases, on a very substantial way. You see employee unit costs for the group being reduced by 3.7%.
That's a combination of improvements coming from the pension fund agreements with British Airways and their Athens project. The result of Plan de Futuro 2, Iberia rolling into a full year of type of progress. It's also the case of Aer Lingus, where they have been growing very significantly, with a very type of more or nil growth in terms of number of employees. The employee improvements in unit costs that we are showing there are totally structural and have to do with measures and plans that we have been implementing in a very efficient way. Supplier unit costs have also been improving by 1.5% in this case, it's also across the board, has to do quite significantly with maintenance costs.
Also, ownership costs are showing significant improvement because in this specific case, you need to remember that we are producing a significant improvement in terms of our fleet and a renewal of our short and long-haul fleet in British Airways, Iberia, and Vueling. Renewing the fleet with new generation aircraft and keeping ownership costs, unit costs on the negative is again, a significant achievement. As a whole, the 15% fuel cost combined with all these negatives are showing a total cost increase of less than 1.79%. This is basically the way or one of the significant ways that we are using to offset the cost, the market price increases in the future. This is the typical chart that we are showing every quarter, trying to show you our sensitivity and our best estimates for the remainder of the year.
We're using, in this occasion, a reference for USD 700 per ton of kerosene and a USD/EUR rate of 117. These have been and will be volatile, there is sensitivity that will be affecting these figures through the next quarters. We are getting to a total fuel bill for the year, which is EUR 5.3 billion. It's lower than what we showed in the last quarter. It's lower both because of rounding. It's not EUR 100 million lower. There is a rounding impact that is affecting the final figure. There's also impacts having to do with a slight capacity decrease that we are forecasting for the remainder of the year. Also variance having to do with efficiency. We've been, in the last quarter especially, penalized in terms of efficiency because of the disruptions.
You can imagine, especially in the short-haul fleet, disruption has been provoking a lack of optimization on our routes, on our approximation to the airports. We feel that for the remainder of the year, we are going to be able to improve our efficiency ratio, not only because disruption probably is going to be fading down, but also because we are going to have full impact of the new generation fleets becoming operational in some 787, 350, and 320 neo. This is the chart showing ROIC. ROIC performance. At the group level, ROIC performance for the last four quarters has been reaching 16.2%. Our operating margin trend, again, for the last four quarters has been improving by 0.2 percentage points. It's reaching 14.7%. High figures, not only for us, but also in reference to most of our peers.
By companies, Aer Lingus is still showing an exceptional performance. ROIC for the last four quarters has been reaching 27.8%. Nominal margin for last quarter is 17.6%. Operating margin trend against last year, 2 percentage points up. Very strong performance. The same as British Airways. British Airways reaching operating margin of 15.8% in the second quarter. In terms of trend of the margin, again, 1.6 percentage points up. ROIC, 17%. Very strong, very efficient figures from the point of view of our use of capital. We have seen some small deteriorations for Vueling. They are basically having to do with their struggles with their operational challenges, with ATC strikes and all this stuff. We are seeing a small type of negative difference for Iberia, and this one has very much to do with new generation aircraft coming into the quarter at a later stage.
We have them in the denominator as use of capital. We don't have them still operating in denominator. That's creating a temporary reduction in the case of Iberia. We guess that for Vueling, it's also going to be a temporary reduction. If we follow by companies, again, their performance for the last six months. This is half of the year results. Again, we need to give a little bit of special attention to Aer Lingus performance, with operating results jumping from last year, doubling last year's figures. And operating margin figure reaching 11.5%, 5.2 percentage points against last year, which is a very high figure. Showing a very efficient cost performance.
We are sorry, there were some manual mistakes on the percentages for the RASK, CASK, and the CASK ex fuel, the figures, the negative figures that you have in the chart, in the screen this time are the correct ones, and they show what should be expected. Very high growth. RASK being lightly negative on an ASK increase of 9%. This shows the strength of the underlying markets that Aer Lingus is basically working. Then CASK associated with this level of high growth, coming down by 6.3% or 7.6% in the case of ex fuel. Strong performance again in sterling for British Airways, with operating results jumping GBP 137 million, in terms of operating profit. Millions. Operating margin, 1.7% up. Good figures both in terms of RASK, 2.6% up, and also CASK ex fuel, every cost per ASK, -2.8%. A very strong, positive performance.
Iberia, again, improving the operating result. Mentioning again the difficulty because of Easter holiday calendar. Growing by 4.7%. In terms of demand, RPK 7.8%. Very important, seat factor improvement. RASK reduction because of the growth, but basically also because of the excellent increase. 2.1% is basically having to do with a 3.4% RASK reduction. Again, you see the CASK there falling by 4%, and the CASK ex fuel falling quasi 5%. Very strong figures again, and the entry costs same. Vueling is basically reducing operating results, having to do very much with these repeatedly mentioned disruptions. If we take into account that just their cost, the ones that we are able to identify directly with the abnormal disruption accounts for EUR 20 million. The cleaner comparable with last year would become clearly possible.
In terms of RASK, they have been able to improve quasi 1% up. Their cost figures are basically damaged because of these disruptions. Below the line, what has happened, we have an improvement in terms of net finance income and expense. We have a more precise one that we have isolated, having to do with pension accounting and how the closing of NAPS for accrual will have a recurrent improvement, a recurrent positive impact on our, I would say, financial cost related expenses. Which have become positive in this occasion. Profit before tax has been jumping from EUR 835 to EUR 1,035. Tax rate has been kept at the 19%-20%-ish rate, which is the one that we want to keep and that we are keeping consistently. Profit after tax has been improving from EUR 669 to EUR 835.
On a fully diluted EPS comparison, we've been growing from 30 to 39, so close to 30% growth in terms of the earnings per share. It is a very substantial improvement. The rate at the end of the figure will be basically coming down because H2 is not sustaining this 30% increase in EPS. What we can say is that we are very comfortable in being able to keep the guidance that we did at the capital market day in terms of the medium-term improvement of EPS. We said at that point in time was going to be above that. In terms of balance sheet, again, improvement. Again, getting stronger. Adjusted net debt as a summary, in relation to EBITDA, has been improving from 1.5 to 1.2 this year.
On balance sheet debt, we have to call it now cash, it's EUR 714 million positive with a type of moderate growth in terms of our cash and interest-bearing deposit positions and the reduction in balance sheet gross debt. It shows that we are keeping, maintaining a very strong financial position, and we are comfortable to be able to assume future decisions, both in terms of investments and also in terms of shareholder return. Having said that, I come back to Willie.
Thanks, Enrique. We continue to grow in a manner that is accretive to the business. You can see there we've tapered our growth for the year, now reporting an expected growth of 6.5%. That's down from the 6.8% that we said at the end of the first quarter. I should say, by the way, that 6.8 did not include the plan for Vienna. If I do like for like, it's actually 6.2 if I strip out the capacity that we're adding in Vienna. That's 6.2. This is as we said we would do, as we go through the year looking for opportunities on a tactical basis to eliminate some of the growth that will help to improve the underlying financial performance.
All of the airlines have brought down their annual growth with the exception of BA, that's principally around the now expected utilization on the 787s, which is now better than we had originally thought given the progress that Rolls-Royce have made on the engine issue. Now looking at 6.5 against the previous report at 6.8 for the year. Based on that we are reiterating our guidance. At current fuel prices and exchange rate, we expect our operating profit to show an increase year-on-year. Just to be clear, that's against the reported operating profit of EUR 3,015 last year, not the restated profit under IFRS 15. To show an improvement against the reported EUR 3,015 operating profit last year. Both passenger unit revenue and non-fuel unit costs are expected to improve at constant currency.
We're very clear in terms of the approach the company is adopting towards our shareholders. We will reinvest in the business through accretive organic growth. We have a commitment to a sustainable dividend, and surplus cash, if we're not using for inorganic opportunities, will be returned to shareholders. On that issue, I should say that there's nothing new to report in relation to Norwegian from what I said at previous announcement. Just to reaffirm that we're just over halfway through the current year share buyback with EUR 256 million of the EUR 500 million as of the 1st of August of this year. We continue to make good progress on our non-fuel unit costs. We're on track to achieve our stated target of 1% reduction in non-fuel unit costs per annum. As we said, it's not going to be 1% every year, but we're making good progress.
There is more to come. We have a plan that gives us confidence that we can deliver on that at British Airways. More to do on plan for Iberia, the Plan de Futuro Part 2 Vuelling next, and the Aer Lingus continuing with their very effective value model, which has proven to be an excellent investment on the part of IAG. All of that then combined with the expansion in LEVEL. The LEVEL performance is very encouraging. Still early days. We've been operating out of Barcelona for a year now. The sold seat factor out of Barcelona is in the order of 97%-98% for June and July.
We will be showing you some stats specifically for LEVEL as we get through the next few months, which clearly it's distorted by the launch of LEVEL out of Paris on the 2nd of July and the launch of LEVEL out of Vienna on the 17th of July. You can see the network that's proposed initially for the four aircraft at Vienna, 14 destinations around Europe. These are principally destinations where we already have a strong presence through the group and a strong presence in particular in Spain through LEVEL. Out of Paris, we're currently flying to Montreal and Guadeloupe. We'll add Martinique and New York later on in the year. We've switched to Boston from Barcelona instead of San Juan, and that's proven to be very effective.
We're pleased with the performance of LEVEL, and we're very pleased with the launch of LEVEL out of Vienna. On Heathrow, as you know, the Airports National Policy Statement received overwhelming support in Parliament. I think the majority in favor was stronger than I had expected, and indeed, I think stronger than the government had expected. The next stage of this is the second-stage consultation by Heathrow, so that they can then develop their Development Consent Order, which would be submitted in winter of 2019 based on current plans. It's well known and expected that there will be challenges to the Airports National Policy Statement, and already a number of bodies have come out and said they will be looking for judicial reviews. The timing of this is likely to be impacted by these various challenges and reviews.
If you assume that everything works to the Heathrow plan, you would see Development Consent Order being granted some stage in 2021, with construction starting shortly after that. They have said that there might be some pre-work done before the DCO is received if that is the case. We still believe if this goes ahead, the expected operational runway would not be until 2026, 2027. Our position remains very clear. We support the expansion of Heathrow, but it's not at any cost. It has to be done in a cost-effective manner, and it has to be done without increasing passenger charges. We will continue to lobby very hard in relation to that. I'm pleased that the government has responded and acknowledged the need for that to happen.
We remain cautious about this in relation to Heathrow's plans because quite honestly, we don't believe Heathrow as it's currently managed, can deliver a third runway in a cost-effective manner. We will keep the pressure on to ensure that if this does get the go-ahead, it's done in a way that won't involve an increase in charges at Heathrow. We talked a lot about air traffic control and specifically identified the operational challenges that Vueling's faced because of strikes in Marseille. You may remember I showed a chart which clearly identified the extensive airspace controlled by Marseille. Those strikes haven't continued in July. However, you'll see from this is a report from Eurocontrol. There's a lot of very interesting information on the Eurocontrol website if you're interested in following up on this.
Despite the fact that strikes have finished, you can see July was even worse still. These are record delays. What you see here is a chart of the total minutes of delays. They take the total minutes that air traffic control delayed flights over the month, and they define that by delays in the airports through air traffic control. The darker color there is the en-route, and that's the one that's specifically of concern to us. Just to give you some figures for the year to date, because I think they do demonstrate just how challenging the environment is. To the end of July, there were 6.3 million flights operated through the Eurocontrol airspace. That's an increase of 3.5% over 2017, for a total of 11.9 million minutes of en-route delays. That's a 126% increase on 2017.
2017 for the full year was 9.3 million. We're already at 11.9 for seven months against 9.3 million for the full year. 54% of that was a direct result of air traffic control capacity and staffing. 18% was as a result of industrial action. In total the vast majority of these delays are being encountered because of inefficiency within the ATC system in Europe. It can be resolved, but it requires air traffic control providers to address their staffing issues. This is of particular relevance in Karlsruhe in Germany, where actually traffic through their airspace has declined this year. That's principally because they didn't believe, strangely enough, that traffic would grow. Rather than increasing their capacity and staffing, they reduced them. For some reason, they thought that Europe was not going to see an increase in traffic, which we have seen.
These issues can be resolved, but it requires ATC units to reflect the growth in the industry, but also to improve their efficiency. We will continue with our competitors through Airlines for Europe to push governments to address this issue. I expect it to be a feature of our business this year and potentially next year. There you have it. I think a good set of results. We are certainly pleased. Good performance in the first half, challenged by the fuel price, but we have been able to offset that to some degree through an improvement in our controllable costs. We have seen a constant currency improvement in unit revenue and a constant currency improvement in our unit cost. We continue to invest in the brands for the benefit of our business and our customers and the future.
As I said, that is a very clear feature of the business. Our cost performance will continue to improve. We remain optimistic about the second half of this year. There is further upside in relation to a number of the airlines, and we will continue to reward our shareholders for their commitment to us as we continue to generate good levels of cash and distribute that cash to our shareholders. I am very confident about the performance for the rest of this year and remaining confident as we look forward into 2019 based on the early planning that we are doing. We will clearly talk more about that as we go through the year in our capital markets day in November of this year. I think at that point, I am going to hand over to Andrew, and he will direct the questions to us.
Thanks very much, Willie and Enrique. We are now ready for your questions. We have the Chief Executives of all the operating companies on the front row. Ask whatever question you would like. We are not using the mics in the back of each seat. We have David, and I have a mic, we will go away.
Thank you. It is Jarrod Castle from UBS. Three, if I may. Can you just give a bit of an update on how cargo is performing and also MRO? I know you were doing quite a big study on MROs and capital markets day. Secondly, obviously, good load factors. I just wanted to get your views on if you think that is sustainable and is the goal still kind of revenue maximization. Then just lastly, on LEVEL, do you think now we will start to see it as a separate reporting unit? Thanks.
Okay. Yeah, Lynne is here. Lynne, do you want to comment on cargo?
Yep, let me take that one. Despite no freighter synergies this year, we've actually had a great first half. At constant currency, the revenues are up just short of 10%, and within that, we're particularly pleased with our premium products. It's been going really well so far. It's been a good year. The market is slowing slightly from the double-digit type growth that the market was seeing, but it's still positive, and we think we're going to have a decent fall 2018.
Thanks, Lynne. On MRO, we're making good progress. What we're doing at the moment is driving efficiency within the MRO units that we directly control. That's principally in Iberia, where they provide services to third parties as well as their own services, and maximizing the efficient use of our own facilities before looking at third-party suppliers. We're doing both. We're putting work in-house where it makes sense, and Iberia has certainly demonstrated that it does make sense that they can compete on a market price basis with our competitors globally. Their engine shop is continuing to perform very well. Where that is the case, where we have efficient internal facilities, we will invest and utilize those facilities to the maximum.
Then where we don't have sufficient capacity, we are going to third-party suppliers, and we've run competitive tenders against a number of key suppliers to ensure that we get market prices for all of our airlines. That helps us to benchmark then the internal performance. We're very clear that our maintenance costs are in line with best practice in the industry. There is more improvements to come through increasing efficiency internally within British Airways, where we do a lot of the heavy airplane maintenance in our own facilities at Cardiff and Glasgow, and we're continuing to look at opportunities to improve that. I'm pleased with the progress we're making. There is more to come, but it's working well so far. On load factors, yes, we believe it is sustainable.
I think it's one of the values of having Aer Lingus in the group and better understanding their value model that they've demonstrated to be very effective. The load factor improvement is in all of the airlines. What it is we're looking at, because we think we undersell our performance to some degree, because when you look at the low-cost airlines like Ryanair and easyJet, they report their sold load factor, not their occupied, which is what we generally do. As you know, if you have a non-refundable fare, you can question whether that seat should be counted as being flown in or not. They count the seat as being occupied, and we traditionally don't. We're looking at how we report that so that you get a better like-for-like comparison, and it enables you to better understand our performance.
In relation to LEVEL, yes, in due course, we will. There's still a lot of noise in the base. From a traffic stats point of view, launching out of Vienna on the 17th of July, midway through the month, and launching in Paris on the 2nd of July with some operation. As we go through that, we'll clean it up, and we'll start giving you more information that's specific to LEVEL. At the moment, you can see traffic stats are embedded in the case of LEVEL Spain, it's embedded in the Iberia figures. We'll give you more visibility on that as we go through the year. We're very pleased with the performance. We look at Barcelona with one year of operations to give us an indication as to where we see LEVEL going.
That's very encouraging with, I think our reported seat factors in June and July in Barcelona were 94%-95%, and sold seat factors 97%-98%.
Hey. It's Daniel Roeska from Bernstein. Good morning. First question may be on the demand environment. Enrique said demand on the main strategic markets remain strong, and if we look at the European somewhere around there. The uplift on multiples seems quite high. Do you expect that to continue into next year, and why? What are the key drivers that will help us see a high GDP multiple on your demand? Second question, still on LEVEL. LEVEL and Vueling. It seems as though LEVEL is solidifying itself as another airline that will be reported in due time. I think there was a question once whether LEVEL would move into Vueling, or there was a combination. How do you think about the split between the two? Is that kind of a geographic split with LEVEL more being around Central Europe and Vueling more around there?
Any light on that will be appreciated. Lastly, I'll pick up Norwegian, and just ask you how long you'll hold onto the shares and if you think that's a good long-term investment.
We do believe demand will remain strong. Certainly, we're at the early stages of looking at our business plan through to 2023, and specifically looking at forecast GDP for 2019, 2020, and making a judgment ourselves in relation to what the various economists say in relation to that. Underlying, we see good demand in all of the markets. I think that's been a feature of this year, and we believe it will continue to be the case in 2019. We'll talk a lot more about that, obviously, in November. Based on our early assessment, we gave a short presentation to our board yesterday just to reaffirm that. When we looked at early capacity plans for 2019 based on where we see economic growth in 2019. That's something that we remain comfortable with. On LEVEL, you actually put it very well.
We think both LEVEL and Vueling brands can operate efficiently in the markets. The Vueling brand is particularly strong in Spain and in Italy, where you would expect them to be strong, and the brand recognition very strong there. I think some markets continue to struggle with the name. I did a number of interviews in radio and TV and press this morning. They all talk about Aer Lingus, British Airways and Iberia, and they're afraid to mention Vueling. Yeah, and the other one. Yeah, sometimes. LEVEL, we clearly want to use any avenue available to us to raise awareness of the brand for long haul benefit. This is, again, an effective way of promoting the brand without spending a lot of money. Launching it in Vienna the way we did, was a huge publicity in that market.
We see that's a market, and it's not just Vienna, it's Germany, Switzerland, Czech Republic routes. We had, I think 80 TV stations turned up to interview me on the day of the launch in Vienna. It is all about effective development of the brand and brand awareness. On Norwegian, we will not be a long-term shareholder in Norwegian unless we acquire the business. We're very clear on that. The small stake that we took was with a view to, as I said previously, initiating a discussion with Norwegian. We haven't had any discussions with them since April, I think it was, with the last contact that I've had with them. I've nothing to add to what I've said. If we decide that we're not going to proceed, we're not going to hold on to the shares. We're very clear on that.
obviously, if we have something to say, we'll say it. I have nothing to say at the moment.
It's James Hollins from Exane BNP Paribas. Three, please. Enrique, you seem to guide to Q3 unit revenue similar to Q2. I was wondering if you could just confirm that's the case, and whether maybe you could beat the 2.3% you saw in Q2 based on a, I think you said, a strong booking outlook. Secondly, maybe you could quantify the premium versus non-premium RASK in Q2. Again, I think you cited strong booking trends in premium, but maybe some more detail on that. Then thirdly, your guidance outlook. Obviously, it's been retained. I was wondering without, and obviously you flagged ATC being a massive problem in July as well. I was wondering if we stripped out the ATC strikes, maybe that guidance could have been slightly better. Notwithstanding that, do you think you'll be well ahead of the 12% annual earnings increase that you look for long term?
Thank you.
I'm afraid we are not going to be quantifying at this stage about our figures for Q3 or for the remainder of the year. That's not how we transmit our messages. I think we should reinforce the basic trends that I was signaling. What we see around Q3, and it's quite a bit at this moment in time, is encouraging. It's encouraging on the revenue side. Also it's encouraging in the cost side. Fuel is going to be creeping up as we progress into the year because of the hedges being unwound. The challenge is going to become slightly greater to Q3 and Q4. We are still confident in being able to beat that former year figures, operating profit on the two quarters, even after restating. That shows a little bit of the type of trending that we can share with you today.
In terms of premium versus non-premium, again, we don't quantify the differences. What we can say is we've been seeing through Q2 and early Q3, which is for July, it's a very premium related month. We are seeing a very strong premium, both long haul, especially North Atlantic, but also short haul. Which is a surprise because premium short haul has been a segment of a business that we weren't so confident about only two, three years ago. There's a little bit of a comeback there, and that's encouraging. That's part of the 2.3 improvement in unit revenues we've seen in the second quarter. Finally, guidance in respect of ATC. Of course, ATC unknown is something that refrains us for being more precise in terms of our full year guidance. It's true.
We need to keep that type of cautiousness because we don't know what's going to be happening after we come back from holiday in August. We don't know. We prefer to retain a little bit of cautiousness. It's true, if we had full certainty on that one, probably, and by the month of October, we will have it, then we could be more concrete in terms of our improvement projections, both in terms of operating profit and earnings per share.
We're certainly very comfortable with consensus as it but we do anticipate air traffic control will be a feature, as I said, of the business. It will take a bit of time to address that, but it can be addressed. I don't see it as being structural. I see it as being a temporary impediment to the operation, which will certainly challenge us in this year and probably challenge next year. With the right attitude and approach, air traffic control providers should be able to address this for 2020, possibly 2019, but I think more realistically it'll be 2020.
Hi there. Good morning. It's Rushika Peruni from Barclays. Three questions from me also. The first one on transatlantic capacity growth. If I look at your overall group, clearly Q3 and Q4 are stepping up in terms of the rate of capacity growth. Therefore, is 10% the right number for the second half on the transatlantic, or will it be higher than that? What will be the mix between new routes and existing routes? The second question I wanted to ask was to develop a bit more on Level, your Austria operations, Vienna operations. Can you explain why you decided to brand those as Level and why you've not kept Level as just the long haul only brand? The third question on the buyback.
If I look at what you've done already in the first quarter, or sorry, in the second quarter, you've done half of the buyback, the EUR 500 million. If you keep at this pace, you'll be done by when you report your Q3 results. Is there any upside on the buyback, please? Thanks very much.
On transatlantic, we're not planning any additional new routes for the rest of this year. Stephen, I think that's, we may add some capacity to some of the existing routes that we've launched, but there's no new routes that are planned for the rest of this year, with the exception of LEVEL Paris, which we've announced, which will do New York starting in, I think it's mid-September. The capacity is likely to be similar, but these routes were still new as we go through the rest of the year because most of them were started at the beginning of the summer. We don't have a third quarter comparison or fourth quarter comparison. On LEVEL, we did debate whether LEVEL should be only long haul. In fact, we concluded some time ago that we would use the LEVEL brand for both long and short haul.
We just used it a little bit sooner than we thought. As I said, it's opportunistic. We felt that it gave us the opportunity to raise awareness in the European market, particularly the, what we call the DACH region, of LEVEL, given that that's an area that's a market that we are looking at for LEVEL long haul growth. It just makes that market more aware of the brand. Clearly, one of the opportunities we have is to provide feed from the short haul network into the long haul. We can do that from other parts of the group as well, but there's nothing to read into that other than it's a pure opportunistic move by us. On the buyback, the buyback is in the hands of our-
Buyback is nothing new. Also we've been progressing a lot on the execution. We have an arm's length model. We really don't interfere in the day-to-day decisions when and how much we buy and how we spread. What we could be expecting is a gradual execution of the remainder of the program from now through the year end.
Given what I said earlier, the board is very clear that if we're not investing the surplus cash that we have in inorganic opportunities, well then, the board is clear that that should be redistributed to shareholders. We've always said it's just a question of the form in which that will take. Now is not the time to talk about that. The board reaffirmed that's the position, but we've not debated anything, and that's a debate that the board will have probably at the third quarter term, and I think we would do.
You. Neil Glynn from Credit Suisse. If I could ask three also, please. The first one, just more looking for a bit more color on the transatlantic underlying performance. If I drill down into British Airways, obviously the heartbeat of your transatlantic business, RASK was up 2.6%. I guess given the APAC weakness, is it fair to think that the transatlantic performance for BA was better than the BA average? Second question, you introduced basic economy, I think in April on select routes. The new distribution model has been live for nearly three quarters. Are those initiatives bearing fruit? Are they actually helping unit revenue now, or is that still very much work in progress? Third question, maybe a little technical, but if I look at the cash flow statement, the payables and deferred revenue line, the inflow there was actually lower year-over-year.
Does that mean anything in terms of how one should think about the third quarter, or are there multiple things going on there beyond forward bookings?
On the transatlantic, you're right. The transatlantic for British Airways was better. Performance for BA, and don't forget, BA had a number of new routes as well. Fair to say Alex, Nashville was much stronger than we had expected. I don't know if you want to comment.
Precisely that. For a brand new route, perhaps because of the strength of the U.S. market this year, the startup of Nashville as a brand new route was really unexpected. I don't know if you want me to comment on NDC and the basic fares. NDC itself hasn't been driving unit revenues. It's given us a very good insight in how to diversify our distribution capabilities that will ultimately lead towards higher unit revenues. The basic fare introduction has been quite interesting, particularly in the selected routes in the U.S. It allows us to not just compete better, but also to provide options of trade up, which were there before, but they've become even more obvious. That's actually pushed as well the revenue environment, it's been quite useful.
Maybe Stephen, would you like to comment on that issue as well?
We introduced the saver fare back in the third quarter of last year. It's allowed us a price point in the market that essentially we took EUR 50 off our lead prices across the Atlantic and gave our guests the opportunity to buy up. Happy to report that for us, it's been revenue neutral because the guests have bought up. It's allowed us to drive load, drive relevance in the marketplace. For us, the distribution model, we still are focused on an 85% direct ambition. We see a direct relationship having a positive impact on unit cost, but also giving us the ability to retail and upsell. We have seen a lot of opportunity from our saver fare. We're at approximately 15%. It's been accretive to load. It's essentially allowed us to be more competitive, particularly in the price-sensitive Irish marketplace.
Pleased to report that we've been managed even with a lead fare reduction to keep unit revenue neutral with its rollout.
I guess working capital variance that you have maybe identified have basic argument behind, which is about the closing cash element of the agreement with the pension trustees. It was EUR 180 million that was paid just at the beginning of the month of April to satisfy and include the [FIs] in the new agreement. That's a cash out that didn't happen last year. There is probably a little bit of noise around the unflown tickets always, and that has to do with the trend is later and later bookings every time. The amount that you hold there at each closing gets thinner and thinner, and probably also a little bit about the sterling weakness. Nothing changing any trend.
Morning, it's Alex Paterson from Investec. Three questions, please. Firstly, could you just say what your exposure to the Argentinian peso is, and whether you're able to hedge that? Secondly, just on Heathrow. Apologies, Willie, I can't remember exactly how you put it, but I think it was along the lines of that you're not confident that their model allows for sufficient delivery. What kind of changes would you like to see to give you protection on that? If that doesn't happen, what would you do? Thirdly, perhaps unkindly, I think if I've got the maths right, your profit would be flat ex the change in disruption charges in the second quarter. Is that what we should look for in the second half?
Just take the last one. We just showed you the Vueling. We didn't show you the group impact of disruption charge in the quarter. We highlighted that Vueling was specifically hit. All of the airlines had a disruption charge. It's not identifying all of the disruption. We had currency as well in the quarter. I think if we strip out everything, the underlying performance in the quarter was still positive. On the Argentinian peso-
Yes
Luis can comment on this. We saw that devaluation of the peso. We haven't seen any-
It hasn't been a correlate though.
Funds are being repatriated.
Yes. In the case of Argentina, what we have seen is that we had a downturn, but after a period of time, the market recovered, and now, for example, LEVEL is working very well. In the case of Iberia, even we are adding capacity there. We don't see now any problem there.
It had a very short-term blip with the devaluation, but it hasn't had any structural impact on the performance.
From the point of view of impact, economic impact, clearly below materiality. The flow of repatriation of funds has been basically kept and maintained.
On Heathrow, what I've said is that I don't believe that the management team at Heathrow can operate in an environment where they've got to control costs, because they've never had to control costs. What they control is how much money they spend, which is as much as possible. They're not going to be able to do that with the development of the third runway. I've made my views very clear. I wouldn't normally comment on management of another organization other than given that this is so important to us. I've made my views very clear to the chairman of Heathrow that I don't believe the management team there has it in their DNA to be able to control costs. As I said to him, if they were buying aircraft, they'd be paying the list price for aircraft. We would never do that.
It's because they've been incentivized to do that. We know that from things that they buy and the prices they pay for them compared to what we would pay for the same. It requires a complete change in attitude in Heathrow, and they're not going to get that unless they change the people. I have not seen any evidence of a change in attitude. If we don't see that change in attitude, we will continue to call it out. I think this is where we have been effective. With the government, we've made it clear that you can't trust Heathrow. That's our strong belief, and therefore you have to put a structure in place that can control Heathrow.
That means strengthening the economic regulation, strengthening the tools available to the CAA, and making it clear the responsibilities that they have in relation to ensuring that costs don't increase at Heathrow. I've been very pleased with both the statements being made by government and the statements being made by the CAA. We will continue to hold them. We've put them under the spotlight, and we'll identify anything that we believe is inefficient. I suspect you're going to hear us talking a lot about that. I think what's good here is that everybody at an industry level who wants to see Heathrow expand, it's very clear that they only want that if it's going to be done in a cost-effective manner.
Same here, obviously. Just one question. First off, cutting through noise, increased PPC 24% on 5% at ASK growth. Clearly with a slight shift in mix to the more leisure, price-sensitive parts of the market. As you've already talked about, as you think of your next plan for the long term, given what you've done in H1, are you thinking of changing the shift in the business again more to some of the price-centric parts of the market given what H1's been doing?
I don't think we're changing. It's a good question, but I don't think we're changing it. I think what we're doing is exploiting the opportunities that we have. Clearly, with Aer Lingus as part of the group now, it's very different. Their model is different to the traditional model. It's been very, very effective. You can see that in the financial performance, but you can also see it in the growth of their network. They're now operating 17 transatlantic aircraft, 13 A330s and four 757s. They're flying to 13 different destinations in North America. We always believed that there was a market opportunity there. I think credit to the team there, they've demonstrated that it's even better than we thought. I think we'd be incredibly foolish not to exploit that. It doesn't change the central gravity or the focus that the other airlines will have.
British Airways is very clear that it will invest in product, particularly in the premium cabins, and you're going to see a lot of that in the coming years. This isn't a short-term investment. This is a medium-term plan that will see BA invest significantly, particularly in the business class product on the long haul with the new seat that you'll see when we take delivery of the A350-1000 next year, and Iberia doing the same. I think there's a big market out there. We're competing effectively in most segments, and we think there, particularly in the long-haul low cost, there's a profitable segment that's underserved and not fully exploited yet that we intend to be a significant player in.
The difference between our attitude and approach to that is we believe we can do that profitably and generate the returns that we've set for all of the airlines. This is the beauty of IAG. This is why we think we're unique. We can exploit all of those opportunities in all segments of the market using different brands, being effective and being focused with each of the operating airlines, doing what's right for their segment and their customer base, having different customer propositions where that makes sense. Working together to learn from one another and working together to make sure that we're getting the maximum benefit from the scale of the operation. I really do believe that we've got a model that is going to be the envy of the rest of the industry.
I know, and some of you will probably be aware of this, that there are others who are talking about mirroring our structure
To enable them to compete more effectively in the market. It's nice if there are other successful operators doing that.
I won't be a quick follow on. Just a question maybe for Stephen and Javier, actually. To what extent are Ryanair's issues helping Aer Lingus and Vueling in the third quarter?
Stephen, do you want to?
I think to be frank, third quarter, traditionally, we are operating full capacity. We are heavily booked, so the opportunity from Ryanair's problems isn't significant. It is on the margin. Longer term, I think you can see we're becoming a very competitive business. Anything that damages Ryanair is ultimately good for Aer Lingus, and we'll exploit that. We'll do so by being disciplined in terms of continuing to take cost out of our business, continuing to be price competitive, and hopefully the market will value the certainty that Aer Lingus will deliver.
Javier?
Same here. If you look at the, let's say the general ATC problems that are all spread out Europe, we are all suffering here and there. Ryanair is suffering the same, easyJet, Eurowings, everybody. I don't think that any of us having a profit out of the problems of the rest. If you look a more precise way in the strikes that they suffer lately, well, of course, you can have a pick-up the week that they're suffering a strike and they're canceling some flights in Barcelona, but I don't think it's material.
Any more questions? Nope. Okay. Thank you everybody for coming. Good to see you. We'll speak to you again on the third quarter results towards the end of October, and hopefully also on 2nd of November when we host our next capital markets day at Heathrow.
Thank you.