Hi, good morning, ladies and gentlemen. I'm very happy to welcome you to these help our results presentation. I'm sure with you that the board is very pleased and very happy with the management for the strong result of the, both the second quarter and the first half of the year. IAG is one of the only fewer lines worldwide to report and improve operating profit compared with the year ago. While most of our peers, has been reporting the claim in the operating profit, IG is reporting an increase to 1 $100,000,000 from $150,000,000 in the first half of twenty seventeen.
Demonstrate our commitment, to increasing shareholder return on the back of strong profitability, we commensate ours second, a 500,000,000 buy bar set in the month of May. We are already more than halfway through. And I'm pleased to announce it as well as the election in the last AGM in June of new member name is Deborah Kerr, who brings a very valuable technology skills, well as
knowledge of
the airline industry is going to be closer to the U. S. Basis of this year. And U. S.
Spirit. I thank you for coming in ahead of us.
Thank you, Antonio, and good morning, everyone. So I'm pleased to say, as German has said, we're making good progress to set a result for the quarter and for the first half. And we're delighted to stick to our guidance, which we'll talk about later on, and despite the ongoing challenge of the 1,000,000 up in the quarter. We're also making good progress against our strategic objectives. We launched Level Out of Paris on the 2nd July.
It's currently signed to Montreal Guadalupe later on, we'll freeze the flights to those destinations and add Martinique and to York. We also launched level short haul out of Vienna on 17th July. So we will have 4 A321 States in Vienna this year, operate network of 14 destinations from Vienna. And we're very pleased with the performance of both of those few initiatives for, forward backing ahead of our plan. We announced also the appointment of the first level CEO that we run the airline for a year without a CEO, when very successful.
So, let's see what happens in the second here. But no pressure on our new colleague to, to get to the company market payers. And we continue to invest in the product depending on whether this is going to be a feature of our business hope that I hear you, British Airways is in its investment on the premium happens and with the addition of the premium, the a330 in the period. We're growing on our networks and, 10% growth in APA on the demand shift into the second quarter, half of that is in Europe, which are performing incredibly well. National is up against zoning terms of performance.
British Airways launched in Philadelphia and Seattle, and I'm already looking at hands to Please go to a daily service, and Iberia, Barcelona with level switched from time to Boston performance fairly strongly as well. And we're also adding capacity on Latin America, the economy on renting from a case to see the uptick in the, Brazilian economy and significantly expansion of gas through the acquisition of the Monarch plus 15% growth there, and done quite a bit on its network. The common platform is proving to be very effective in a good performance of our control of a non fuel unit costs in the half and in the quarter, in particular, 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 rollouts on the age distribution model. That's been better than expected. So all in all, progress on all of the key strategic issues for the group. And in terms of the financial performance, Enrique is going to through a detailed presentation of this, but you can see, our financial targets are all, either being exceeded or at the half year point 30, well within range from the full year performance, with rights in the half year trading 12 month basis 16 points, which is a very good performance group. So, I'm pleased with what we've achieved so far and very up us with the back half of the year, continuing customers and then to go for.
I'll hand over to Enrique now who will take through the detailed presentation for the quarter.
Good morning, everybody. Again, restating what has already been said. You've been making these quarter, 1,000,000 of operating profit before exceptional. And this is a very top of 833, 35. And this is a very significant improvement, again, last year.
It's on an outbound basis on a simple comparison, 1,000,000, but if we taking into account the different ForEx environment that we have had last year and this year, and the negative impact that different ForEx environment that had on our transaction and translation, ForEx impact, the basic difference basic improvement is to CHF 111,000,000. And this is on a quarter where we have been basically having to lead with some significant challenges as we have been explaining. One side is the holidays, has been falling in a different way. This year, it's seen than last year. And this has of course created some different in margin generation and profit generation for some of our companies, especially companies that are dwelling or linguist for Iberia with a significant seasonal impact on their, pattern on their production pattern.
Also, as you know, it's a fuel price, fuel price has been increasing there substantially. We have a high level transemption for the year already hedged. But of course, it will move from $500 per ton That was the level of last year to 700 above 700 this year. That makes a significant sense. The other one has to do with ATC disruption, basically related to spikes and that is specifically European French strikes, which have been affecting very particularly, well, especially well.
And its operations. And we have been making a deep dive in the, impact, the direct impact on cost base and, we'll be reaching a figure of around 1,000,000, which is very substantial. And basically, as you will see afterwards, explain, most of the weak, performance of winning through Q2 2018. So when we get to how we've been producing these operating profit levels and figures. It's going through a growth in terms of ASKs 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, right? So this means that basically we are facing demand on our main strategic markets, which is growing ahead of our capacity. And that's a very positive and important signal for us and for the way we are growing. Because at the same time, At the same time, we are improving passenger unit revenues by 2.6%, which is, I would say, very substantial improvement taking into account again this quarter 2 has been suffering because of different Easter holiday calendar. So very happy with this 2.3 improvement and also happy because what we are seeing in terms times on our booking profiles for Q3 especially is basically showing and there is very type of aligned improvement into the next future.
What to say, our non passenger unit revenues has also been growing. Our revenues have been growing, significantly above the ASK growth figure. So 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 these additional revenue growth is not related through our ASKs. It's not related to our operations and it brings costs on a cost model which are not related to ASKs is managed to do basically with Iberia Third party MRO business, for which show us holidays, or avios or others.
So that's something that, will try to explain how it's been impacting to us in the quarter. On the cost side, basically we are showing a minus 2% on non fuel unit cost performance against last year. Of course, it has to do with our underlying performance but also through the positive comparison against the disruption, the blackout that the average was going through in June last year. So, a significant amount of the cost reduction has to do with this fact is one of facts that affected our figures negatively. And we were very clear it was 1,000,000 last year, Q2.
But this year, we have had also this I would say non transport costs growing and our own disruption costs having to do with the ADC strike. So 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 1.5, which is very well aligned with our medium and long term target in controlling and non fuel unit cost base. So finally, fuel costs, fuel costs have been dragging our results and our margins in this quarter 2 and they represent an increase in constant currency and unit terms of 15% as you will see later on. As a whole, to explain here how the bridge of operating profit is flowing from the figures last year into the figures this year. So we take the adjusted of a IFRS 15 figure which was 790 and we include the negative impact of Forex this quarter, which is 66 we get the regular rebase for the results this year.
And that's sort of regular rebase comparator we've been generating margins and profits to growth, yeah, 1,000,000. And very substantially, through the management of our passengers and non passenger unit revenues, 120,000,000, very substantial improvement on our unit revenue base and on our other revenue sources of business. And then it's, the fuel cost, which has, impacted negatively on a constant currency unit term base by 186,000,000. If you compare passenger revenues, non passenger revenues and fuel costs, you can acknowledge how we have been offsetting. We have been answering.
We have been basically mitigating the significant impact on the cost fuel prices through improvement on the revenue side. And the proportion is very high, is 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 1,000,000,000. But that it's basically affecting positively as you will see afterwards, all of our costs So it's affecting positively, not only labor costs, but also supplier costs and ownership. And this is how it shows our capacity development to Q2 and our revenue development, unit revenue development, and at the same time.
So relevant to common basically North America and North America with a very significant capacity increase, 10% up against the last year. Across the board. So half of this 10% is attributable to rich show's growth. The rest is basically the rest of the companies. So, Erlingu's, Iberia and level Also half of these increased capacity has been dedicated to new.
The other half has been basically increased frequencies in tools that we already operate. So signature on this significant growth we value positively, very positively, just a small reduction in unit revenue because if we take into account the push 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 in the U. S.
Side and probably better than our European peers. After commenting North America, where we still see, I would say, positive trends coming through Q3, and 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 ASKs, but unit revenues have been very strong. Capacity demand equation in intra European traffic 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 is slightly negative has to do basically with stage length, yeah, stage length happening in the Iberia network and in the dwelling network, and having to do with the increase in the peninsula to island class, which as you can imagine has double stage length as the intra peninsula. So these minor reduction in revenues with this domestic improvement of 8.3 means that we have been improving margins on that segment of our net, the same as Europe make. We see also, a continued strength on Latin American and Caribbean market.
And that, despite having to go to, difficulties in countries as urgency now or Brazil. Ethics there even in Argentina and Brazil have been holding steadily. And unit revenue as you see, have been improving very significantly with growth levels, which are in excess of 6%. So Latin America is an area of our network, which is still performing very strongly. And what we are seeing into the remainder of the year is showing similar trends.
Amessa is also improving. Basically, we have been reshuffling our operations there. And getting to a better mix in terms of unit revenues. Asia Pacific maybe is a slightly weaker side of our network. And 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 CACI Pacific.
So jumping into the cost side, fuel, as you see in constant currency terms, has been increasing by 15%. And the rest of our non fuel cost lines have been, reducing the unit cost basis in some cases on a very substantial way. So you see employee unit costs for the group being reduced by 3.7%. And that's a combination of improvements coming from the pension fund agreements in British Airways and their, assets projects. Also, the result of a planned F2202, Iberia rolling into a full year of type of progress, but it's also the case of, linguists where they have been growing very significantly with a very type of more or need growth in terms of number of employees.
So the employee improvements in unit cost that we are showing there are totally structured and have to do with measures and plans that we have been implementing in a very efficient way. Supplier unit cost has also have also been improving by 1.5% in this case and it's also across the board, has to do quite significantly with maintenance costs. Also ownership costs are showing significant improvement because in this case, you need to remember that we are producing a significant improvement in terms of our feet and a renewal of our shortened loan haul fees in Bridge Airways, Iberia and welling. So renewing the fleet with new generation aircraft and keeping ownership costs, unit costs on the negative. Is, again, a significant achievement.
So as a whole, the 15% fuel cost combined with all these negatives, are showing a total CASK 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 fuel price. This is a 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 reference for dollars per ton of kerosene, of 700 and dollar euro rate of 1.17. This has been and will be volatile. So that 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 5.3. It's lower than what we showed in the last quarter. It's lower both because of rounding. So it's not 1,000,000 lower.
There is a rounding impact that is affecting the final figure, but there's also impact having to do with a slight capacity decrease decrease that we are forecasting for the remainder of the year. And 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 evoking, a lack of optimization on our roots, 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 seats becoming operational in 787.
It this and 320 years. And this is, the chart showing RoyIC, ROIC performance. So at the group level, ROIC performance for the last four quarters has been improving has been reaching 16.2%. Our operating margin trend again for the 4 for the last 4 weeks has been improving by 0.2 percentage points and it's reaching 14.7 So high figures, not only for us, but also in reference to most of our peers. By companies, Erlingos is still showing an exceptional performance ROIC for last four quarters.
Has been reaching 27.8, nominal margin for last quarter 17.6. Operating margin trend against last year, 2 percentage points up, very, very strong performance the same as, bridge show is, bridge show is reaching operating margin of 15.8. In the second quarter. And, in terms of trend of the margin, again, 1.6 points up. ROIC 17%.
So very strong, very efficient figures from the point of view of our use of capital. We have seen some more deterioration for dwelling. They are basically having to do with the struggles with their operational challenges, with the ATC strikes and all this stuff. And we are seeing a small type of a negative difference for Iberia. And this one has very much to do with a new generation aircraft coming into the quarter at a late stage.
So we have them in a denominator as use of capital. We don't have them still operating in the nominator. So that's creating a temporary reduction in the case of Iberia. We guess that for Vueling, it's also going to be a situation. So if we follow by companies, again, the performance for that 6 months.
This is half of the year results. Again, we need to give a little bit of a special attention into a linguist performance with operating results jumping from last year's doubling last year figures and operating margin figures reaching 11.5 or 5.2 percentage points against last year, which is a very high figure. So showing a very efficient cost performance. We are sorry there were some manual mistakes on the percentages for the RASK CASK fuel, the figures, the negative figures that you have in, the chart in the 3 in the same other correct ones and they show what should be expected. So very high growth or RASK being slightly negative, on an ASK increase of 9%.
So this shows the strength of the underlying markets that, elingo is basically working. And then CASK associated with this level of high growth, coming down by 6 or 7.6 sick days of acute. Strong performance, again, in sterling, of which shall we with operation result jumping 137,000,000, in terms of operational profit 1,000,000, operating margin, 1.7 send up, and good figures, both in terms of RASK 2.6% up. And also CASK ex fuel entry cost per ASK times 2.8, our very strong positive performance. Iberia, again, improving the operating result, mentioning again the difficulty because of Easter holiday calendar, growing by in terms of demand, RPK7.8, so very important feedback to improvement.
RAS reduction because of the growth basically also because of a actual length increase of 2.1 percent is basically having to do with a 3.4% reduction. But again, you see the CASK there falling by 4 percent and the CASK ex fuel falling was a 5%. So, very strong figures again. And the entry costs. Welling is, basically, reducing our operating results having to do very much with this, repeatedly mentioned disruptions.
If we take into account that, just their the ones that we are able to identify directly with disruption, abnormal disruption accounts for 20,000,000. So the cleaner comparable with last year would become clearly possible. But in terms of RASK, they have been able to improve plus a 1% up. The cost figures are basically damaged because of this disruption. So 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 and a current positive impact on our, I would say, financial costs related expenses, which have become positive in this occasion. So profits before tax has been jumping from a 35 to, 1035. Tax rate has been kept as the 1920 ish rate, which is the one that we want to keep and that we are keeping consistently. So profit after tax has been improving from $6.69 to $8.65 and 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. This is a very substantial improvement, and the rate at the end of the figure will be basically coming down because H2 is not sustained this 30% increases in in EPS. But what we can say is that we are very comfortable in being able to keep the guidance that we did at the the marketplace in terms of the medium term improvement cost EPS we said at that point in time was going to be a buffer. So, in terms of balance sheet, again, improvement, again, getting stronger, adjusted net debt as a summary in relation to EBITDAR has been improving from 1.5 to last year to 1.2 this year on balance sheet debt, we have to call it now cash It's, 714000000 positive, with a growth type of a moderate growth in terms of our cash balances bearing deposit positions and the reduction in balance sheet gross debt.
So 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 less and also in terms of, shareholder, Richard. So having said, as I come back to
So we continue to grow in a manner that is accretive to the business. You can see that we've tapered our growth for the year. Now we're reporting, an expected growth of 6.5% and that's down from the 6.8% that we said the end of the first quarter. I should say by the way that that 6.8% did not include the plan for Vienna. So if I do like for like, it's actually 6.2 of Espipas, the capacity that we're adding in Vienna, that's 6.2.
So This is, as we said, we 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, and 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 had made on the engine issue. So now looking at 6.5 again, the previous report of 6.8 for the year. Based that we are reiterating our guidance current fuel prices and exchange rate, we expect our operating profit to show an increase year on year. And just to be clear, that's against the reported operating profit of 3015 last year, not the restated profit under IFRS 15.
So, to show an improvement again, the reported 3015 operating profit last year and both passenger unit revenue and non fuel unit costs are expected to improve at constant currency. So, we're very clear in terms of the, approach the company is adopting towards our shareholders We will reinvest in the business through accretive for organic growth. We have a commitment to a sustainable dividend and surplus cash, if we're not using, for inorganic opportunities, we'll be returned to shareholders. On that issue, I should say that there's nothing new to report in relation to Norwegian from what I've said at previous, announced And just to reaffirm that we're about halfway through just over halfway through the current year share buyback with 256,000,000 of the 500,000,000 as of, the 1st 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 and there is more to come. And we have a plan that gives us confidence that we can deliver on that at British Airways more to do on plan for in Iberia, the plan to procure Part 2, well in next and the Erlingus continuing with their very effective value model, which has proven to be, an excellent investment on the part IAG and all of that then combined with the expansion in level. The level of 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, July, So we will be showing you some stats specifically for level as we get through, the next few months, which has periods distorted by the the launch of, level out of Paris on the 2nd July and the launch of level out of Vienna on 17th July. You can see the network and that's proposed initially for the 4 aircraft at the end of 14 destinations, around Europe. And these are principally destinations where we already have a strong presence through the group and strong presence, in particular, in Spain through a level.
And out of Paris, we're currently flying to Montreal and Waterloo, we'll add Martynique and New York later on in the year. We've switched to Boston from Barcelona instead of someone, and that's proven to be very effect So we're pleased with the performance of level and we're very pleased with the launch of level of asphalt at Vienna. On Heathrow, as you know, the National Policy statement received overwhelming support in parliament. I think the majority in paper were stronger than I had expected in data, I think stronger than the government had expected. For the next stage of this is the 2nd 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 National Policy Statement and already a number of parties promotions that they will be looking for additional review. So the timing of this is likely to be impacted by these various challenges and reviews. But, if you assume that everything works to the Heathrow plant, you would see development cent order being granted at some stage in 2021 with construction starting shortly after that. They have said that there might be some pre work done before the GCO is received, if that is the case We still believe, if this goes ahead, the expected operational runway would not be until 2026, 2027 And 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. And we will continue to lobby very hard in relation to that. And I'm pleased that the government has responded and acknowledged the need for that to happen. So, 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 run way in a cost effective but we will keep the pressure on to ensure that if this does get to go ahead, it's done in a way that won't involve an increase in charges. To Heathrow.
We talked a lot about air traffic control and specifically identified the operational challenges wellington space because of strikes in Marsek. And you may remember, I showed a chart, which clearly identified the extensive airspace controlled by Marce. Those strikes haven't, continued in July. However, you'll see from this, this is a report from Euro Control. There's a lot of very interesting information on the Eurokutron website if you're interested in following up on this.
But despite the fact that strikes have finished, you can see July was even worse still. And these are record delays. So what you see here is a chart of the minutes, total minutes of delays, but they take the total minutes, that, air traffic control delayed flights, over the month and they define that by delays in the little, but the darker color there is the on route. And that's the one that's specifically of concern to us. And 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 6,300,000 flights operated through the Euro Control Aerospace. That's an increase of 3.5% over 2017. We're a total of 11,900,000 minutes of unload delays. That's a 126 percent increase on 2017. 2017 for full year was 9,300,000.
So we're already at 11,900,000 for 7 months against 9,300,000 for the full year. And 54% of that was a direct result of, air traffic control capacity in San Francisco. 18% was as a result of industrial action. So in total, you know, the vast majority of these delays are being encountered because of inefficiency within the HCC system in Europe. So it can be resolved, but it requires air traffic control providers to address their staffing issues.
And this is of, particular relevance in Carlsworth Germany where, actually traffic through their airspace has declined this year. And that's principally because they didn't believe strangely enough that traffic would grow and rather than increasing their capacity and staffing, they reduce them. So for some reason, they thought that Europe was not going to see an increase in traffic, which we have seen. So these issues can be resolved, but it requires ATC units to to reflect the growth in the industry, but also to improve their efficiency. And we will continue with our competitors, through airlines for Europe to push governments to address this issue.
But I expect it to be a feature of our business this year and potentially next year. So, Heather, you have it. I think a good set of results were certainly placed good performance in the first half, challenged by the euro price, but we've been able to, offset that under grade through an improvement in our controllable costs. We've seen a, constant currency improvement in unit revenue and a constant improvement constant currency improvements in our unit costs. We continue to invest in the brands, the benefit of our business and customers and the future.
And as I said, that's 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's 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. So I'm very confident about the performance for the rest of this year.
And remain in confidence for, as we look forward into 2019 based on the early planning that we're doing, but we're clearly talking more that as we go through the year in a Capital Markets Day in November of this year. So I think at that point, I'm going to hand over to Andrew and he will direct the questions to us.
Thanks very much, Willie and Enrique. We're now ready for your questions. We have the chief executives of all the operating companies on the front row. So I'll pass whatever question you'd like. We're not using the mics in the back of the Steve.
We've got David and I have a mickey
to go away.
Thank you. It's Jarrod Castle from UBS. 3, 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 MRO since Capital Markets Day.
Secondly, obviously, good load factors. I just wanted to get your views on if you think that's sustainable. And Is the goal still kind of revenue maximization? And then just lastly on level, I mean, do you think now we'll start to see it as a reporting units? Thanks.
Okay. Yes. Lynn is here. So, Lynn, do you want to comment on cargo?
Yes. Let me take that one. So despite Norfidget spinners this year, we've actually had a great first half at constant currency, the revenues are up to short of 10%. And within that, we're particularly pleased with our premium products. It's been going really well since So, it's been a good year.
The market is flowing slightly from the double digit type pool market we're seeing, but it's still positive and we're, we're going to have a peak from 2018.
Excellent. On MRO, we're making good progress. So what we're doing at the moment is, driving efficiency within the MRO units we directly control. And 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 supplier. So we're doing both.
We're putting work in house where it makes sense. And Iberia has certainly demonstrated that it does make sense, but they can piece on the market's price basis with our competitors globally. Their engine shop is continuing to perform very well. And where that is the case where we have efficient internal facilities, we will invest and utilize those facilities to maximum. And then where we don't have sufficient capacity.
We are going to, 3rd party suppliers and we've run competitive tenders against a number of case suppliers to ensure that we get, market prices for all of our airlines. And helps us to benchmark and the internal performance. So we're very clear that, our maintenance costs are in line with best practice in the industry. There is more improvements coming through increasing the efficiency, internally within British Airways where we do a lot of the heavy maintenance, airframe main in our own facilities at Carta, in Glasgow, and we're continuing to look at opportunities to improve that. So I'm pleased with the progress we're making there is more to come, but it's working well so far.
And on load factors, yes, we believe it is sustainable. You know, I think one of the values of having Erlingus in the group and better understanding their value model that they've demonstrated to be very effective So, you know, 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 Bryan and ECS, they report their sold load factor not occupied, which is what we generally do. And 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. So they count the seat as being occupied, which traditionally don't.
So 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 And in relation to level, yes, in due course, we are there's still a lot of noise in the base, you know, so from a traffic stats point of view, you know, launching out at the end on 17th July midway through the month and launching in Paris on the 2nd July with some operation. Well, as we go through that, so we'll clean it up and we'll start giving you more information that's specific to level. But at the moment, you can see traffic stats are embedded in, the case of level, Spain is embedded in the Iberia figure. And we'll give you more visibility on that as we go through the year. We're very pleased with the performance And so and I think that's we look at Barcelona with 1 year of operations to give us an indication to where we see that will go in.
That's very encouraging with I think our reported safe factors in June July in Barcelona were 94%, 95% and so we'll see factors 97% 98%.
It's Daniel Roeska from Bernstein. Good morning. First question, maybe on the demand environment, And like you said, demand on the main strategic markets remain strong. And as we if you look at the European GDP, we'll do somewhere around there. So the uplift on GDP, the T Mobile team is quite high.
Do you expect that to continue kind of into next year and why? So what are the key drivers that will help us see a high GDP multiple on your demand? 2nd question, of sale level, kind of level and whirling, 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 running or there was a combination. So how do you think about the split between to leave that kind of a geographic fit with Nevro, more being around Central Europe and willing more to bear and relied on that will be appreciated.
And 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 It's early. It's we're at the early stages of looking at our business plan through to 2023 and specifically looking at to forecast GDP for 2019, 2020 and making a judgment ourselves in relation to what the various economists say in relation to that. But 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. So we'll talk a lot more about that obviously in November, but 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.
So that's that's something that we remain comfortable with. On level, you actually put it very well. We think both level and Welling brands can operate efficiently in the markets. The Welling 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 markets continue to struggle with the name.
You know, we did a number of interviews in radio and TV and press this morning and I'll talk about Erlinda British Airways in Iberia and they're afraid to mention wellings. So, I think, yes, on the other one, yes, sometimes So yes, level, we clearly want to use any avenue available to us to raise awareness of the brands for long haul benefits. So this is again, an effective way of promoting the brand without spending a lot of money. And launching it in Vienna the way we did was a huge publicity in that market. And we see that's a market.
And it's not just Vienna. It's Germany Switzerland, you know, Czech Republic, who we had I think ATV stations turned up to intervene on the day of the launch here in Vienna. So it is all about, effective development of the brand and brand awareness. And on Norwegian, we will not be a long term shareholder in Norwegian unless we acquire business. So we're very clear on that.
The small state that we took was with a view to 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 the reply. So I have nothing to add to what I've said, but if we decide that we're not going to, proceed, we're not going to hold on to the shares. And we're very clear, but obviously, if there's something to say, we'll say it. And of good to say at the moment.
It's James Rollins from Exane BNP. Can you please Enrique, you seem to guide to Q3 unit revenues similar to Q2. I was wondering if you could just confirm that's the case on 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.
And then thirdly, your guidance outlook, obviously it's been retained. I was wondering without amongst you flagged ATC being a massive problem in July as well. Earning if we sort of stripped out the ATC strikes, maybe that guidance could have been slightly better. And notwithstanding that, think you'll be well ahead of the 12% earnings annual earnings increase that you've you look for long term? Thank you.
Yes, I'm afraid we're 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 speak our messages. But I think we should reinforce the basic trends that I was signaling. So 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 hedge has been unwinded. So the challenge is going to become slightly greater 2Q3 and Q4. But we are still, we're still confident in being able to beat that former year figures operating profit on the two quarters, even after the race date.
So that shows a little bit of the type of, trending that we can share with you today. Premium version on premium. Again, we don't quantify the differences. But, again, what we can say is we've been seeing to Q2 and the early Q3, which is for July, it's a very premium related month to 2, we are seeing a very strong premium both long haul, especially in 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 2, 3 years ago So there is a little bit of a comeback there and that's encouraging.
That's part of a 2.3 improvement in year what we've seen in the second quarter. And finally, guidance in respect of ATC. Of course, ATC and NOL is something that refrains that for being more precise. In terms of our full year guidance. It's true, but 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. I would prefer to retain a little bit cautiousness and 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.
Yes, we're certainly very comfortable with consensus as far as it's we do anticipate that air traffic control will be a feature, as I said, of the business. And it'll it will take a bit of time to address that, but it can be addressed. So 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. But with the right attitude and approach aircraft control providers should be able to address this for 2020, possibly twenty but the volume realistically will be 2020.
Hi there, good morning. It's Ashikar Sakhrani from Barclays. Three questions for me also so. And the first one on Transatlantic capacity growth, relative to your overall group, clearly Q3 and Q4, stepping up in terms of the rate of growth. Therefore, is 10% the right number for the second half in the transatlantic or will it be higher than that?
And 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 and your Austria operations, the operations. Can you explain why you decided to brand those as level and why you've not kept level as just a long, long haul only brand? And then the third question on the buyback if I look at what you've done already in the first quarter also in the second quarter, you've done half of the buybacks of 500,000,000. And if you keep at this pace, you'll be done by when you support your Q2 results, is there any upside on the buyback, please?
Thanks very much.
Okay. Well, on Transatlantic, we're not planning any additional new routes for the rest of this year, Steven, I think that's, we may add some capacities to some of the existing routes that we've launched, but there's no new routes that have planned for the of this year, with the exception of level parts, which we've announced, which we'll do, Newark starting in September, So the capacity is likely to be similar, but it will be these routes are still new as we go through the rest of the year because most of them were started at the beginning of the summer. So, we don't have a third quarter comparison or 4th quarter comparison. Unlevel, yeah, we did debate what the levels should be only long haul. In fact, we concluded some time ago that you know, we would use the level of brands for both long and short haul.
We'll just use it a little bit sooner than we thought. And as I said, it's opportunistic we, we felt that to give us the opportunity to raise awareness in the European market particularly the what we call the DAC region of levels given that that's an area that's a market that we are looking at level of long haul growth. So it just makes that market more aware of the brand. And clearly, one of the opportunities we have is provide feed from the short term network into the long haul. Now we can do that from other parts of the group as well, but, that's there's nothing to read into that rather than it's a pure opportunistic group, bias.
And on the buyback, well, the buyback is, is in the hands of Yeah.
We'll buy back nothing new and also we've been progressing, a lot on the execution and, we'll have a we have announced Lens projects and sorry, model that. So we're really don't interfere in the day to day decisions when and how much we buy and how we spread. So what we could be expecting is a gradual execution of the remainder of the program from now to the year end. But
given what I said earlier, the board is very clear that if we're not investing the surface cash that we have in inorganic opportunities. So then, you know, the exposure's care, that's that cash that should be redistributed to shareholders. And we've always said it's just a question of the form in which that would take. But now is not the time to talk about that. The board reaffirmed that that's the position, but we've not debated anything and that's a debate that the board will have probably at the first quarter.
You, Neil Glenn from Credit Suisse. If I could ask 3 also, please. The first one, just more looking for a bit more color on the trans Atlantic underlying performance. But drill down into British Airways, obviously the heartbeat of your Transatlantic business, Ralph 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 VA average?
Second question, you introduced basic economy, I think, in April on select through. The new distribution model has been live for nearly 3 quarter. Are those initiatives bearing fruit? Are they actually helping unit revenue now, or is that still very much work in progress? And third question, maybe a little but if I look at the actual statement, the payables and deferred revenue line, the inflow there was actually lower year on 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 was, well, British Airways was better. Performance for BA. I don't forget VA has a number of new routes as well. Purchased a, Alex, Nashville was much stronger than we had expected if you want to comment on that.
Precisely that. For a brand new route, perhaps because of the strength of the used market this year, the startup of the 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.
But the basic fare introduction has been quite interesting,
particularly in the selected routes in
the U. S. Allows us to not just compete better, but also to provide options of our trade up which, we're there before, but they become even more obvious. So that's actually pushed as well the revenue environment. So think by you.
Thank you, Stephen. Would you like to comment on that issue as well?
Yes, we introduced the Sabre Fair back in the third quarter of last year. It's allowed us a price point in the market that essentially we took a €50 offer lead prices across the Atlantic and gave our guests the opportunity to buy up. I'm happy to report that for us it's been revenue neutral because the guests have bought up. And so it's allowed us to drive load, drive relevance in the marketplace. And for us, the distribution model, we stay focused on an 85% direct ambition we see a direct relationship having a positive impact on unit cost, but also given us the ability to retail and upsell So we see we have seen a lot of opportunity from our Sabre Fair where approximately 15 percent.
It's been accretive to load. It essentially allowed us to be more competitive particularly in the price sensitive virus marketplace and please report that we've been managed, even with a lead fair reduction keep revenue, unit revenue neutral, with its roll out.
Working capital variance that you have made identified have basic argument behind which is about the closing cash element of the agreement with the pension of interest fees. So it was $180,000,000 that was paid, just beginning of the month of April to satisfy and include the employees in the new agreement. So that's a cash out that didn't happen last year. There is probably a little bit of noise around the un flown tickets always and that has to do with the trend is later and later bookings every time. So, the amount that you hold there at each closing and probably also a little bit about sterling wheat, but nothing changing any trend.
It's Alex Patterson from
Investec. Three questions please. Firstly, could you just say what your exposure to the Argentinean peso is and whether you're able to hedge that. Secondly, just on Heathrow, apologies, really, 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 us to be efficient to live. What kind of changes would you like to see to give you protection on And what if that doesn't happen, what would you do?
And then thirdly, perhaps unkindly, I think if I've got the us, right? Your profit would be flat ex to 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 welling. We didn't show you the group impact of disruption charge in the quarter. We highlighted that welling was specifically hit. All of the airlines had a disruption charge.
And it's, you know, it's not identifying all of the disruption. So, we had currency as well in the course. So I think the underlying, we strip out everything, the underlying performance in the quarter was still positive. On the, Argentinean pesos, the risk can comment on this. We saw that devaluation of the ASO.
We haven't seen
it hasn't been a correlator. So
Yes. In the case of Argentina, what we have seen is that we've had a downturn But after a period of time, the market recovered and now for example, level is working very well. And in the case of Iberia, even we are adding capacity see that. So we don't see now any problem there.
So it's a very short term data with the evaluation, but it hasn't had any structural impact on the performance.
From the point of view, the impact in economic impact clearly below materiality. So the
flow of repatriation of funds has been basically kept on pain. And 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, but they control and establish money they spend, which is, you know, as much as possible. And they're not going to be able to do that with the development of the 3rd runway. So I think my view is very clear. I wouldn't normally comment on management of another organization with the bank, 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 the costs. As I said to him, if they were buying aircraft they'd be paying the list price for aircraft. You know, we would never do that. But it's it's because they've been incentivized to do that. And we know that from things that they buy, at the prices they pay for compared to what we would pay for the same.
So it requires a complete change in attitude in Heathrow and they're not going to get that unless they change the people. And I have not seen any evidence of a change in attitudes. And if we don't see that change in attitudes, we will continue to, call it out. And we will 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 the Heathrow.
And 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 maturing that costs don't increase at Heathrow. And I've been very pleased with both the statements being made by a supplement and the statements being made by the CAA. And we'll continue to hold them. We put them under the spotlight and we'll identify anything that we believe is inefficient and I suspect you're going to hear us talking a lot about that. But I think what's good here is that everybody, at an industry level, once see heat flow expand, it's been very clear that they only want that if it's going to be done in a cost effective manner.
Damian
Burrow, obviously. Just one question first half, cutting foot noise increased CVC, 15% on 5% SK growth. And clearly with a slight shift in the to the more leisure, price sensitive parts of the market. As you already talked about, as you think of your next plan, that's a long term. Given what you've done in H1?
Are you thinking of changing the shift in the business again more to sort of measure price centric parts to market given what H1 is a division?
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. And clearly, with our linguists as part of the group now, it's very different. Their model is different to the traditional model.
It's been very, very active. And you can see that in the financial performance, but you can also see it in the growth of their network. You know, they're now operating 17 transit to aircraft, 13, 83, thirties, and 4757. They're flying to 13 different destinations in North America. So we always believed that there was a market opportunity there, but I think credit to the team there that demonstrated that it even better than we thought.
So I think we'd be incredibly foolish not to exploit that. It doesn't change the center of gravity or the focus that the other airlines will have, you know, British Airways. It's very clear that it will invest in, product, particularly in the premium provinces. You're going to see a lot of that in the coming years. So this isn't a short term investment.
This is a medium term plan that we'll see be a 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 351,000 next year. And Iberia doing the same. So, you know, 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 as a profitable segment that's underserved and not fully exploited yet that we intend to be a significant player in. And 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. And this is the beauty of IoT. That's 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. We're working together to, to learn from one another and working together to make sure that, you know, we're getting the maximum benefit from this game of the operation And I really do believe that we've got a model that, you know, is going to be the envy of the rest of the industry. And I know some of you will probably be aware of this that there are others who are talking about mirroring our structure, to enable them to to pay more effectively.
So it's nice if, if there are other successful operators doing that as well.
I want a quick follow on. Just a question maybe for Steven and Javier actually to what extent Ryanair's issues helping Erlingus and Vueling in the third quarter
Stephanie, do you want to?
I think to be frank, we 3rd quarter. Traditionally, we are operating full capacity. So 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 Railinguez and we'll exploit that. But we'll do so by being disciplined in terms continue to take cost out of our business, continue to be price competitive and hopefully the market will value the certainty that Erlungus will deliver.
Same here. Same here. If you look at the let's say the general ADC programs that are already spread out Europe, we are all suffering here and there, Ryanair suffering the same easyJet Eurowings, everybody. So I don't think that we are any of us having to profit out of the province and the rest. If you look a more precise way in the strikes that they suffer lately, well, of course, you can have a pickup the week that there's a further spike and there's cancellation of patching bottlenecks in this material.
Any more questions? Okay. Well, thank you everybody for coming. To do. We'll speak to you again on the third quarter results towards the end of October and hopefully also on 2nd November when we host our next Capital Markets Day at Heathrow.