Good morning, ladies and gentlemen, and welcome to the International Airlines Group third quarter 2025 results call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Through-the-phone lines and instructions will follow at that time. I would like to remind all participants that this call is being recorded. I will now hand over to Luis Gallego, Chief Executive Officer, to open the presentation. Please go ahead.
Thank you very much. Good morning, everyone, and welcome to the IAG third quarter results. Today, I have with me Nicholas Cadbury, our CFO, as well as members of the IAG Management Committee. This has been another good quarter for IAG, and we are on track for another very good year. Our strong fundamentals underpin our best-in-class value creation over the long term. We are continuing to see robust demand for travel across the group. Our leading network and brands have helped to deliver a strong revenue performance in the quarter, with fee rates broadly flat at constant currency against a record quarter last year. Our transformation initiatives are delivering effective cost control, supporting our competitive cost base, on which we are delivering market-leading margins at 22% for the quarter and over 15% on a last 12-month basis.
As Nicholas will show you, every single one of our airlines has reported a margin over 20% this quarter. This was also one of the best summers operationally that we have ever had, which is also supporting positive NPS performance. Our balance sheet continues to be strong, giving us optionality around our capital allocation, whether that is investing in the business at high rates of return or reducing our gross leverage as we take on encounter aircraft deliveries or as we increase our dividends, as we are doing with this set of results for our shareholders. We intend to announce further returns of excess cash to shareholders at full-year results in February. For the short term, we are confirming that our outlook for this year is unchanged. In the longer term, we are confident in our strategy to create value for our shareholders.
On that note, I will hand over to Nicholas to take you through the details for the quarter.
Thank you, Luis. Good morning, everyone. I'm pleased to announce another strong set of results. On the left, you can see the breakdown of the key drivers of the profit increase we've delivered in Q3. These are shown on a constant currency basis, with the impact FX shown separately. We delivered a passenger revenue increase of EUR 177 million, or 2% up. Cargo revenue decreased slightly as we cycled over the elevated yields and the Red Sea disruption in 2024. Other revenue continued to perform well with the increase, including higher IAG Loyalty revenues, together with increased third-party revenues from Iberia's MRO business. As we guided, the performance of non-fuel costs continued to improve quarter on quarter, and the increase was partially offset by lower fuel prices.
We split out the effects into a separate item, and you can see that we had an EUR 8 million overall headwind from FX on profit, with benefits from the weaker U.S. dollar more than offset by weaker sterling euro in the quarter. Overall, we increased profit by EUR 40 million on the record performance in Q3 last year. By OpCo, Iberia, Aer Lingus, and Loyalty showed strong profit growth, whilst BA and Vueling profits were slightly down year on year. BA is shown in euros here, and so was impacted by the depreciation of sterling against the euro, driving a larger reduction in euro terms than in sterling terms. Now, let's look at the operating company's performance in more detail. Aer Lingus increased its operating profits by EUR 31 million to EUR 170 million, and its operating margins by 3 percentage points to 21.6%, despite competitor capacity growth in Dublin.
Q3's performance was driven by the expansion of its networks, particularly on the North Atlantic, and the impact of the industrial action of approximately EUR 30 million in Q3 last year. British Airways saw its operating profits decline slightly by GBP 18 million, and its operating margins remained high at 20.2%. Unit revenues fell 1%, driven by the expected softer trading in U.S. sold North Atlantic economy leisure and by 7% capacity growth in European short-haul. Non-fuel unit costs increased by 3%, driven by employee pay deals and resilience costs not being fully offset by the transformational benefits. Iberia continued to report strong results, with operating profits increasing EUR 56 million to EUR 510 million, and its operating margin increasing 2.2% to 23.7%. Iberia also saw softness in the North Atlantic, driven by competitor capacity into Madrid. However, it was fully more than offset by the continued strong demand in the South Atlantic routes.
Non-fuel costs increased by 2.2%, primarily due to resilience costs and higher ownership costs from the new aircraft. Dwelling operating profit was EUR 20 million lower at EUR 272 million, but at a high operating margin of just over 25%. Good non-fuel unit cost performance was offset by declining unit revenue, driven by slightly weaker demand, particularly in Benelux and Germany and the U.K., as well as the effect of investing and strengthening some of its core markets, which was not fully offset by the strong demand in other markets. IAG Loyalty reported GBP 141 million in operating profit, up GBP 16 million year on year, at a margin of nearly 19%. Moving on to our revenue performance in more detail, overall demand for travel continues to be strong, driven by demand for our network and our strong brands.
The performance was in line with the guidance we gave in our outlook at the entrance. It grew capacity by 2.4%, with unit revenue declining by 2.4%, and around 2 percentage points of which was due to currency movements, so only marginally down on an underlying basis against a record quarter last year. If we look at the performance by region, North Atlantic capacity increased by 2.9%, with unit revenue decreasing by 7.1%. It's really important to note that around half of this was due to currency headwinds from both weak U.S. dollar and sterling against the euro. The trends were similar to those we reported at the interim results. We continued to see some softness in U.S. point of sale economy leisure and an impact on our transfer flows of U.S. direct capacity growth into secondary markets in Europe. Premium demand held up well.
South Atlantic continues to be the star performer in the network. Unit revenue increased 0.6% on a capacity increase of 2.9%. Iberia's performance continues to be strong, with the routes to Argentina continuing to perform well, along with the routes to Venezuela, Ecuador, and Colombia. Europe unit revenues decreased by 6% on a capacity increase of 2.4%. I've already mentioned weaker demand for Vueling and the additional capacity from British Airways. In addition, there were effects headwinds from the weak sterling-euro, representing about 2 percentage points on unit revenue impact, with Iberia and Aer Lingus performing better. To finish off, Asia-Pacific performed well, and Africa and the Middle East and South Africa partly saw the impact of additional capacity to Saudi Arabia and South Africa.
Just turning to Q4, so far, we're pleased with the revenue performance, with passenger revenue held positively year on year, including the North Atlantic. We did have a particularly good in-month booking in December last year following the elections, so we do have some tougher comparatives over the next few weeks. Despite this, we are confident about the long-haul markets in particular. While it's a bit further away, H1 is so far looking positively. Just to note, as you've seen, the currency impact on PRASK in Q3 was -2%. In Q4, we currently see higher adverse effects on revenue of around 3.5 percentage points, most of which is due to the average sterling to euro rate, which was about EUR 1.2 last year, and this year looks like it'll be around about EUR 1.15.
Clearly, the majority of the translation effects impact on revenue is offset by favorable impact on costs. I guided last quarter that the increase in our non-fuel unit costs this year would be weighted to the first half of the year, and I'm pleased that we're broadly flat in Q3 compared to a + 4.6% increase in Q2. This is a good performance overall and in line with our expectations. Currency benefits of these unit costs by about 2%. Employee unit costs increased 2.9% due to agreed salary increases, which were only partially mitigated by productivity benefits for more punctual operations. Supply cost inflation was more than offset by procurement-driven transformation initiatives, part of our wider transformation program. Ownership unit costs increased by 9%, driven by investments in new aircraft products and IT.
Fuel unit costs reduced by almost 11%, driven by lower commodity prices and the fuel consumption savings from the new generation aircraft we're investing in. We continue to expect non-fuel unit costs to increase around 3%, in line with the guidance I gave you at the last quarter. Likewise, on fuel, we continue to expect fuel costs to be around EUR 7.1 billion. This slide shows our financial results for the nine-month down-to-net profit. Operating profit increased by around 18%, and pre-exceptional profit after tax increased by approximately 20% to EUR 2.7 billion, which, in addition to a lower share count from our share buyback program, drove a 27% increase in adjusted earnings per share. I'm pleased to report that our balance sheet continues to strengthen.
Gross leverage reduced to 1.9x , down from 2.6x at this time last year, driven by the regular maturity of our aircraft financing and paying down IAG bonds. Net debt was relatively flat year on year, despite the shareholder returns, and net leverage decreased to 0.8 x due to the year-on-year profit improvement. We still plan to keep approximately two-thirds of our expected 25 new aircraft deliveries unencumbered, and we still expect to spend EUR 3.7 billion on CapEx this year. This is my final slide. I want to remind you about how we think about capital allocation, which is core to how we create long-term value for our shareholders. Our first priority is to make our balance sheet strength, targeting net leverage below 1.8 x through the cycle, which is a proxy for investment grade.
Our second priority is to invest in the long-term strength of the business at high rates of return, with a focus on rebuilding our fleet, improving our customer experience, and enhancing our digital capabilities and advancing our sustainability agenda. We're, of course, committed to a sustainable dividend return, and I'm delighted to announce an interim dividend of EUR 220 million. This represents approximately 50% of the anticipated annual total dividend. As with the earnings per share, the dividend per share will also benefit from the share count reduction. Furthermore, with the current EUR 1 billion share buyback program nearly completed, we intend to announce further returns of excess cash to shareholders at our full year 2025 results at the end of February.
We are confident of a strong end to the year and feel that this is a more appropriate time for the board to make their decision in line with pre-COVID practices. On that positive note, I will now hand back to Luis.
Thank you very much, Nicholas. As usual, I would like to remind you of our strategy that focuses on three strategic imperatives. Firstly, our strong core. We are deploying our capacity in a disciplined focused way to leverage our market-leading positions. We are building our brands by investing in new, more efficient aircraft and better cabins and services, alongside more efficient operations. Secondly, we are building up our complementary capital-light businesses, in particular IAG Loyalty. Thirdly, we have a robust financial and sustainability framework. By consistently executing these imperatives, we can deliver and maintain targets that we think are both best in class and appropriate for our business through the cycle. As I mentioned earlier, we have now delivered a 15.2% margin over the last 12 months, which is market-leading.
Fundamentally, we believe that delivering earnings growth at these levels of margin and return capital will create substantial value for our shareholders. As usual, there are a lot of things going on around the group, and we have highlighted a few initiatives on this slide. Our network strategy is to focus on our core markets. With increasing scale in our hubs, we offer our customers more choice of destinations and frequencies. We focus on delivering improvements to the customer journey in our aircraft and on the ground, and through a combination of the human touch and digital innovation. A good example of this is our announcement yesterday that we are going to partner with Starlink to provide high-speed connectivity in all of our airlines, with the rollout likely starting early in 2026.
Our punctuality, as a driver of both customer satisfaction and efficiency, is amongst the best in the world, and in particular, has been excellent over the summer despite many external headwinds. On-time performance improved across all airlines, with British Airways achieving the best OTP at Heathrow since 2012, up by 10 points year on year. NPS also continues to improve around the group, with dwelling NPS hitting a record high this summer. Finally, we are pleased to announce today that IAG Loyalty has signed a multi-year partnership extension with American Express. Moving on to our outlook, our expectations for the 2025 full year are unchanged. As Nicholas has explained, we are booked positively so far for Q4, including the North Atlantic, so we are on track to deliver another very good year of revenue and earnings growth, margin progression, and strong shareholder returns.
Demand for travel is strong, and our fundamentals are proven. We have leading market positions, a great network, powerful brands, and an attractive customer base. Through a transformation program, we are delivering the margins that we are reporting today. We still have a significant number of initiatives to roll out across revenue, costs, and operations. We believe that we can continue to deliver strong value creation for our shareholders through the cycle. I will finish by summarizing those key elements of that business model and our long-term investment case: strong markets, strong execution, strong value creation. On that note, we will turn the call over to Q&A.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question on the phone line, please signal by pressing star and then one on your telephone keypad. We ask that you limit your questions to a maximum of two. We will pause for a moment to assemble the queue. Your first question comes from the line of Alex Irving of Bernstein. Your line is now open.
Hi, good morning. Two from me, please. First of all, we heard from some of your peers about a less peaky summer, but with the summer extending into Q4. Does that match your assessment? If so, is that a 2025 factor or a lasting change? What does that mean for how you manage the business? Second, on the North Atlantic, we saw Alaska launching Heathrow. Did they get that slot from your existing joint business? If so, why? Should we see that as a precursor to potentially adding them into that focus? Thank you.
Okay, thank you. For the Q4 and Q1, we currently have about 80% of the Q4 book, and the overall revenue performance is good. The passenger revenue is held positively versus last year. We need to take into consideration that last year was very strong, with total PRASK up 3.1% in general, and in North America, it was up 14%. Performance is different by region. We see improving trends in North Atlantic, and currently, revenue is held positive. We see also a strong October and November in North Atlantic. South Atlantic, as we said in the presentation, continues to be strong. In Europe, we continue seeing some softness in intra-Europe, but lately, we have seen improvement. The rest of the world is also positive.
What we can see for Q1 right now, with revenues around 30%, the levels of revenue that we have are also above last year. In general, the trend that we see is positive. Q3 was a little weaker, as we said, North Atlantic point of sale, non-premium, and transfer traffic had an impact in that. We see that the situation is improving since then. About Alaska, maybe you want to comment on?
Yeah, I think Alaska is a very important partner to American and BA, and we have a very good connecting partnership over Seattle and to places in the West Coast where they've developed the network over recent years. You know, it'd be premature to talk about entry into any joint business, but we work with Alaska on a very constructive basis, and we would have helped them through the kind of slot process in advance of next summer.
All right, thank you.
Your next question comes from the line of James Hollins of BNP Paribas. Your line is now open.
Merci. One for Sean, please. Maybe if you could give us a quick update on the very sort of current news on the U.S. shutdown. Clearly, international flights are protected, but whether you might perceive there's a little bit of reticence on late bookings on your transatlantic network. While you're on, maybe update on the BA digital transformation. I think we're getting into the upcoming. For Nicholas, fully a cost. Let me put it this way. Is there a good chance you beat the 3% guide, particularly with FX and obviously the performance you've had so far? Is there anything specific on costs in Q4 that would mean you don't beat 3%? Thank you.
Just on short term, I think it's early stages, but right now, we're not seeing any impact. I think one thing I would say is we have, it's November, so there's lots of kind of ability to reaccommodate across networks if there is an impact. We fly to 27 points directly in the U.S., and we work with American closely in sort of setting over those networks. I think right now it's business as usual, and we're not seeing any effect. I think our direct network out of London, if there is any marginal impact on connecting traffic, we'll have plenty of capacity to kind of reabsorb any rebooking that we need to do. In relation to digital transformation, yeah, we are entering an exciting phase.
About 50% of our bookings on dot com now are going through what we call our new booking flow, and that's showing very encouraging results. We're happy with conversion. We're happy with performance, and we're very happy with the CSAT. We'll begin to scale the number of bookings we put through that platform as we head in towards the December-January sale period. The vast, vast majority of bookings heading into next summer will have come through that new booking flow. We're in a position that we'll start rolling out the app-facing element of the digital transformation early in 2026. Yeah, it's exciting, and we're very encouraged by what we're seeing.
Yeah, just on the cost side, James, we've got all the MC here, so thanks for putting them under a bit of pressure overall. We're sticking with our kind of 3% guidance at the moment. You can see FX is moving around quite a bit at the moment overall, but we think that's still we're holding on for that at the moment. We're pleased with the progress we've made, particularly with supplier costs overall, particularly with the kind of process improvements we're putting and the kind of procurement savings we're doing. We're pleased with how that's gone.
Okay, thank you.
Your next question comes from the line of Stephen Furlong of Davy. Your line is now open.
Yeah, hi there. Maybe for Luis, just talking about or thinking about into next year, even into next summer, I'm just thinking about the competitive environment. Maybe you could talk, maybe go through the regions again, because I'm thinking about things like, let's say, in LATAM, is there any change? Obviously, you have Turkish investing in Air Europa. I don't know on the other side. In the U.S. or North Atlantic, I'm thinking about United, or I think it's Delta expanding a lot of capacity. For yourselves, in terms of capacity, maybe you'd be able to grow a bit more at Heathrow if there's a bit of an improvement with the trends, etc. Just talk about the competitive dynamics as you see over the next 12 months in general terms. Thank you.
Okay, thank you. I can comment on the capacity that we see for the next quarters. We need to take into consideration that still the people there are working in the programs for summer next year. What we see, for example, for Q4 and first quarter of 2026 is that the capacity from London Heathrow or North Atlantic London Heathrow is going to decrease in comparison to the previous year. That is going to help. We see that other hubs, the traffic with North Atlantic are going to be more difficult. Dublin, for example, the people, they are adding a lot of capacity in winter. That is not usual. We see in Q4 an increase of capacity of around 16% and in the first quarter, 15%. We are going to have a very tough competitive environment there.
Madrid, North Atlantic, Q4, we are going to have an increase in capacity of around 5% and the first quarter, 10%. It is true that Q3, the increase of capacity was higher, and now the people, they are moving capacity from Madrid to other regions in Spain. If we look at Latin America, from London, we see a decrease in capacity in the last quarter and also in the first quarter. Madrid is going to have an increase of around 4% in the Q4 and around 7% in the Q1. Even with this increase in capacity, we are seeing strong yields and strong load factors. The intra-Europe is different in the different hubs that we have. Heathrow Europe is going to be almost flat. Madrid Europe is going to be around 7%. Barcelona Europe, around 4%.
Dublin Europe, again, high increase of capacity of around 12% in the fourth quarter and 15% in the first quarter. The competitive environment, North Atlantic, we see positive trend. It's true that all the starting capacity, but in the joint business, we keep our market share and also in number of premium seats, we continue with a very good position. The other topics that you said, for example, Turkey with Europa, I think it's going to be an investment of 26% in the company. I suppose they will try to develop the business, but we don't see an impact of that in the short-term medium term. I don't know if there was another question.
Okay, thank you.
Thank you.
Your next question comes from the line of Jaime Rowbotham of Deutsche Bank. Your line is now open.
Morning, gentlemen. Two from me, please. First, almost certainly for Nicholas on buybacks. On slide 11, you reiterate the plan to return cash to maintain leverage of 1.2x-1x times net debt to EBITDA. Obvious question, but if we assume you're still at 0.8 x by year-end, it would imply a quite staggering EUR 3 billion-EUR 5 billion of potential headroom. Is it as simple as that, Nicholas? Presumably, at the lower end of that range, you could leave some buffer for potential M&A opportunities like TAP. Second question is just really on short haul. Could you remind us what the plan is for Vueling next year? I think there were some clues there in what Luis said about capacity out of Barcelona. It seems like the short haul environment's a little bit tougher for you.
You talked about weaker demand, Benelux, Germany, U.K., not offsetting strength in other areas. Some comments, please, on short haul outlook and the plan for Vueling. Thanks very much.
Yeah, so just start with shareholder returns. This year, we'll have returned, by the time we get to the year-end, EUR 1.2 billion of share buybacks and EUR 400 million of dividends overall, so EUR 1.6 billion in total. We haven't quite finished the share buybacks, and we'll finish that over the next month or so overall. We've kind of held back doing the next shareholder return to year-end just to get it back into a normal process. We did an exceptional one that we did last year just because it was the beginning of the process, but we'll just get back into the normal swing of it. It's a normal year-end decision that we have overall. Hopefully, we've kind of said in our statement that we're confident in going to give you further share returns later on in the year overall.
Just in terms of the kind of way we think about it, as you said, we've got that range of 1.2x-1.5x net leverage below that overall. I think kind of right at the moment, we've got some increasing capital coming over the next few years, and as you say, the TAP. We will probably manage more towards the bottom end of that range rather than the top end of that range overall, but that still gives us kind of quite a lot of flexibility overall. We've had one or two analysts kind of saying that not giving shareholder buybacks for this quarter may show a kind of lack of confidence in the kind of future trading.
I think kind of after the strong quarter we've just had and the fact that we've just said that we're booked positively for the year-end as well and kind of confidence in our overall strategy, we kind of find that that's obviously a personal statement, but it doesn't reflect the confidence we have in our own business.
About the short haul, maybe Carolina can expand on Vueling, but the Q3, the point-to-point traffic was okay, and we suffered in the transfer traffic, as I said previously. In the Q4, what we see is that competition is high. In Q4, intra-Europe capacity is going to raise around close to 6%. We have different performance in different countries. For example, there are markets that are working very well for us. We need also to take into consideration the impact of the FX in the Q4 that is going to be relevant. Maybe Carolina, you can comment on Vueling.
Sure. If we look at Q3, I think it's a mixed bag, there are different things. Some markets worked very well. Domestic worked very well for us. As Nicholas said before, we had some specific markets with a weak performance: Germany, U.K., Netherlands. Netherlands very linked to the tax situation there. We have a very strong position in Barcelona, and we offer from there over 100 routes. It's a constrained airport, and we have one-third of domestic traffic. We are very used to face strong competition, but we are positive about our ability to compete. If you look at our RASK, a good part of that is self-dilution. We have decided consciously to invest in some markets. Canary is a good example. We have grown over 30% in Canary , but we are already seeing the results of that investment.
Although you are right, it's going to be very competitive, I think we have a good position to compete in our core markets.
Great answers. Thank you.
Your next question comes from the line of Savi Syth of Raymond James. Your line is now open.
Hey, good morning. Maybe for Nicholas, I'm not looking for guidance or anything like that, but I was wondering if you could talk a little bit about as you look out to 2026, just across the kind of the main cost items, just generally what you are expecting in terms of inflation and any kind of offsets or headwinds or tailwinds that we should think about.
Yeah, we're not giving guidance for 2026 overall at the moment. I think all I'm going to say just on the cost base as well, we've given kind of clarity for the last kind of two quarters on this year, which we're confident delivering. We've just delivered a good quarter on the cost base overall. So they'll be up about 3% year-on-year on non-fuel cost. I'm expecting kind of with the transformation program and also with kind of hopefully some kind of easing inflation overall, that that kind of number should moderate into next year overall.
That's helpful. If I might just also ask just on the demand side, if you could kind of give a little bit more color between just kind of corporate versus premium versus kind of maybe the economy leisure.
Yes, I think that if we look at business traffic year-to-date, we have volumes around in total at group level of around 70% of the volumes that we had in 2019 and revenues close to 87%. The situation is improving, but slowly, and with a very different performance in the different airlines. For example, in British Airways, 62%-63%, 82% in revenue. In Iberia, close to 80% in volume and above 100% in revenue. In Aer Lingus, close to 100% in volume and similar in revenue. With this, we expect to finish 2025 with business revenue above what we had last year. If we look at the volumes in Q3, we saw a decline in comparison with last year. What we see now in Q4 is positive.
For example, in British Airways, we are seeing now a growth in North Atlantic, both U.K. and North Atlantic point of sale. We think that this is going to help to the recovery. In any case, as I said, in some way, we are in a stable situation and the improvement is slowly. In any case, when COVID started, we said that we were expecting to come back to levels of revenue of around 85% of the revenue we had in 2019, and we are above that. The good news is that we are delivering these strong results with this percentage of business traffic, what it means that our model is working very well also with the premium leisure traffic.
That's helpful. Thank you.
Welcome.
Your next question comes from the line of Harry Gowers of JPMorgan. Your line is now open.
Yeah, good morning, everyone. Two questions, if I could. The first one, just if I could ask on your positively booked revenue comments for Q4, if you could maybe clarify how positively booked we're talking and could we end up seeing RASK higher year-over-year for Q4 versus last year? The second question, I was just wondering if you could go into some color on the U.K. point of sale on Transatlantic and also U.K. point of sale on short haul as well, and if we're seeing any demand weakness or price sensitivity. Thanks a lot.
Yeah, just, Harry, I'd love to give you more detail, but I think that's about as much as we can give you that it's booked positively overall. I mean, we're currently, we've had a good October and November, particularly seeing actually point of sale in North America being good on both sides, actually, from U.K. and from the U.S. as well. Actually, U.S. leisure point of sale in the last few weeks has been a bit better as well, which is good to see. The only thing we're just calling out is we had a particularly strong December last year across the Atlantic. After the Atlantic, there was a bit of kind of pent-up demand, and we saw it very strong. We're just about to enter those weeks, but we're feeling pretty positive about it overall. I think that's all we can say overall.
ASK is going to be up about 2.3% in the quarter as well.
Yeah, just on the U.K. segments in terms of the booking profile, Q3, we were positive across both business and premium and non-premium leisure. Q4, it's a little bit more positive, but we do not go into the specifics. Yeah, we are seeing stable demand is the best way I would describe it. That is relevant, I think. It is prevalent in both Europe and/or U.S. markets, as Nicholas said.
Great. Thank you very much.
Does that answer your question, Harry? Does that?
Yeah, yeah, of course. Thanks a lot.
Next question comes from the line of Conor Dwyer of Citibank. Your line is now open.
Thank you very much. I'd like to come back a little bit to the buyback question. Nicholas, you obviously talked a little bit about managing towards the lower end of that range of 1.2x to allow for some potential lamination, things like that. That still implies basically you can pay out practically more than your free cash over the next few years. Is that really how we should be thinking about this, or are there other things in there that might, let's say, move that leverage number away from that kind of level? Second question was just actually on the Loyalty. Growing revenue at about 7%, that growth has been extremely high in recent years. I'm just kind of wondering, are you now kind of viewing that business as a bit more mature now?
Should we be really kind of thinking that as a kind of mid-single-digit % growth business? Thank you very much.
Yeah, just on the share buyback, yeah, I mean, we've set out the guidelines for where we want to manage our balance sheet to overall. I think when we did that, we kind of said the things that we'd be looking out for, it's a forward-looking thing rather than a backwards necessarily. We'll be looking forward to how does the outlook look. We're feeling pretty positive about that at the moment. We also look at what M&A is on the horizon. There's TAP, maybe potentially overall. There's also kind of CapEx, what our CapEx commitment's looking forward to as well. Now, CapEx, as we know, is about EUR 3.7 billion this year. Next year, probably more about EUR 4 billion. We know over the next few years after that, it starts to ramp up.
That's why we could be managing towards the bottom end of that and making sure we've got some good headroom and ready for that overall.
Yeah, on the Loyalty side, just to come back on that specifically, yeah, we are continuing to see, if you look at the year-to-date performance, because there are some specifics around promotions, particularly around issuance of the points. If you look at it across the year, we're still seeing double-digit growth in terms of the currency that's being issued and there or thereabouts on usage of those points and how those points are redeemed. I think we're seeing a continued growth and a continued double-digit growth that we've seen over previous years.
Great. Thank you very much, both.
Your next question comes from the line of Ruairi Cullinane of RBC Capital Markets. Your line is now open.
Yes, good morning. First question on cargo revenue declines. We expect similar dynamics in Q4 given another strong prior year comp. Just sort of coming back to the unit revenues, do you think the North Atlantic trends you've seen were suggestive of a liberation day headwind, which may now be fading given the improvement looking forward? Thank you.
Yeah, just on cargo, yes, you're right. I think we're seeing actually the supply, the demand for cargo is still relatively good. You can see that our weight we're carrying is still up overall, but we're just seeing some softness in yields. As we said in the call, that's really based on the fact that we're anniversarying the high yields we had as there was a lot of disruption over the Red Sea last year overall. That's just the supply chain around that is just kind of normalizing overall. You'll see that probably into Q4 as well. The North Atlantic, I'm not sure we can, anything else we can really say about that overall. I mean, liberation day was in April overall.
Yes, I will say in Q3, we were below what we expected. Since then, we see a recovery. As Nicholas said before, we see an improving trend with a strong October and November, and we are booked positively. I think the effect of the Liberation Day is far away.
Your next question comes from the line of Andrew Lobbenberg of Barclays. Your line is now open.
Morning, guys. Can I ask two questions? One on what labor relations lie ahead. I think there are some at BA , but perhaps you can correct me on that and whether there are any elsewhere in the group. Second question, I'd quite like to hear your thoughts around the situation at Aena, where I mean, obviously, you want low airport charges, I can imagine, but it appears that the airport company is becoming something of a political football in Spain, and its plans to develop the infrastructure are potentially being threatened. Where do you sit? Obviously, you do want beautiful facilities for very low costs, but how do you think about your key partner providing infrastructure in Spain being such a political football?
Thank you. About the labor situation, I think we have closed the most important agreements at group level. We are still negotiating with some places like Iberia with the ground staff. Maybe Marco, you can comment on that later. We have now a situation, a difficult situation in Manchester, where, as you know, we have a strike, and it's probable that we are going to continue with a strike. In Aer Lingus, they need to negotiate the agreement with the different collectives. In Vueling also, some of the agreements expire at the end of this year, and they are negotiating. Maybe you can comment, maybe lean the situation in Manchester.
Yeah, just about Manchester in context, first of all, it's two aircraft there at the Manchester-based supplies, Transatlantic. We're managing through the strike. We've been accommodating, reaccommodating more than 90% of our customers in the strike date so far. We reached agreement with Unite on two separate occasions, and they recommended deals to their members, which the members rejected. We've benchmarked pay. We've been working through ACAS. I think the key thing here is we need to be cost competitive. Manchester needs to be able to perform financially. It needs to justify its asset allocation. We're part of a group where capital is constrained and distributed where returns can be made the most. I'm very conscious of that when we look into our industrial relations situations.
Okay. Maybe, Marco, do you want to comment on the ground stuff?
Yeah, indeed. In terms of the labor relations in Iberia, last year, there was a major milestone that was achieved. It was to set the new collective agreement with our pilots that, as you know, is a system where we share the benefits of the results of the company, not only linking the pay evolution and the one-off evolutions and payment to the EBIT results of the group, but also to the productivity of our staff, to the NPS and the OTP, so the capability to deliver to our customers. The same has been achieved this year with our cabin crews. We've just started now the process of opening the negotiation with our ground personnel. We're confident that the same scheme and system, of course, with the nuances for the specific collectives, can be applied also there. It's very beneficial also for the people.
Where we mark, as you know, we also introduced the possibility for people to buy shares and become shareholders. More than 1,000 of our staff currently have subscribed to that. That is another element of sharing the benefits of the results of the company. Maybe a comment in terms of the Hainan situation. Of course, our strategic plans imply the necessity of an alignment with Hainan, and we have a common view of bringing to the full potential of the Spanish, both operating companies and infrastructure. Of course, that needs to be done at an affordable price. It is the same view that the group has with regard to the U.K. We are in close contact with Hainan to ensure that that will happen.
Thanks. Can I just check? Is everything done and dusted on CLAs at BA, or is there anything else to add?
Yeah, our collective agreements go to the end of 2026 and mid-2027. So we concluded those over the last 18 months.
Great. Thanks.
Your next question comes from the line of Patrick Creuset of Goldman Sachs. Your line is now open.
Hi, Luis, Nicholas. Just coming back to your comments on Q4 trading, please. When you say booked passenger revenue for Q4 is up, you're only including on the Atlantic. Just double-checking that that is after the FX headwind that you flag or this constant currency. And then secondly, if we look at your ASK guide of 2.3% for the quarter, again, coming back to your comment on increasing passenger revenue overall, that would imply RASK at least somewhere around flat year-on-year consensus standing at - 2% for the quarter. Is that a fair interpretation? On the basis of that, looking at consensus expectations of somewhere around EUR 5 billion, just shy of EUR 5 billion profit for the year, do you still feel comfortable with that? Thanks.
Just, yeah, you're right. The guidance we've given on the positive booking includes the FX. It is not constant currency overall. It takes account of the currency impact as well. I'm afraid I can't give you any, I'm not going to give you a PRASK guidance for North Atlantic for Q4 overall, except I think we said we're positive overall. I mean, that's taking account of the ASK growth as well, but we've got positive momentum on that overall. And the last question.
EUR 5 billion.
Oh, and so consensus, yeah, you're right. Consensus is just under EUR 5 billion. And if we weren't happy with that, we'd have to say something, and we're not saying anything, so.
Thank you.
Your next question comes from the line of Muneeba Kayani of Bank of America. Your line is now open.
Yes, good morning. Thanks for taking my questions. I just wanted to touch on this new AmEx partnership extension. How should we be thinking about it in terms of impacting the Loyalty top-line margins? Then just related to that, overall margins into next year, you're very much at the top end of your midterm guide. You talked about possibly unit cost inflation being better next year. You're seeing good demand trends. How are you thinking about that margin into next year, please? Thank you.
Yeah. Just starting on the AmEx agreement, yeah, so we're very pleased that we've reached an agreement with a long-term agreement with American Express. That continues the good work that we've done previously in terms of that. That agreement includes the British Airways co-brand, the membership rewards business, and the acceptance of Amex across the different airlines, this time to include Level as well. We're delighted that we have this multi-year agreement, and that will help the Loyalty business as we go through the next few years to have that agreement in place. We look forward to working with AmEx in the years to come.
Yeah, just on guidance, we're not giving guidance for next year, but I mean, I think kind of with the dynamics that we're seeing, we still see strong demand for travel. We still see a constraint in supply of aircraft into the market next year overall. We've got our transformation program, which is both driving our own revenues and also the kind of costs under control, which I said should moderate overall. If you put those dynamics together, there's no reason why we shouldn't be at the top end of our guidance and sustain that overall. Of course, it depends on where fuel is and inflation ends up overall. I think we're feeling confident at the moment.
Thank you.
Your next question comes from the line of Gerald Khoo of Panmure Liberum. Your line is now open.
Morning, everyone. Two if I can. There's been a lot to talk about the ongoing strength in premium leisure. I just wondered whether you could give an indication as to the relative importance of premium leisure within the premium cabin. I know you probably won't give an exact figure, but just something to give a rough indication of how important that is proportionately. In terms of that trend of growth, what could derail it? What could cause the premium leisure strength to reverse or soften? Secondly, I think there was some talk about strong short-haul capacity growth at British Airways. I just want to kind of understand where that was and why that was done, please.
Yeah, just in kind of premium leisure, yeah, we do not disclose the kind of precise mix that we have got on premium leisure. Premium seats, if you look at it, it is different by different airlines. Of course, if you look at British Airways, we have got about 45% of our seats are premium overall, but a significant part of that is leisure. We have got about 20% of our overall customers are corporate customers. And probably more of that when you look at SME businesses overall, but they are an important part of our growth. You can see that in terms of corporate customers overall, they are still down year-on-year, but actually that has been filled very successfully by the demand for leisure, particularly at the front end of the plane. It still continues to be strong.
In terms of derailing, one of the concerns we had as you get up to the we're approaching the U.K. election, which feels like it could be targeted more at our customers at the wealthier end of the line. You would expect maybe some slowdown, but we're seeing the opposite of that at the moment as well. The people who've got money have got money at the moment.
Yeah. In terms of short-haul capacity, there's probably two dimensions driving it. One is we have been replacing A319s with A320s and 321s at Heathrow. So there's a chunk of gauge. We've also been reorienting the network to fly to probably more of the Southern European leisure markets, which gives us a stage-like effect, which increases ASKs. We've been continuing to build back our Euroflyer business at Gatwick. That is operating kind of 25-26 aircraft, which is probably where it was back in 2017, 2018. They are kind of three drivers of that capacity increase. We've had some gauge benefits as well at London City, where, again, we're adding some ASKs, but again, primarily into longer sector leisure markets, which were robust over summer.
Okay, thanks very much.
Your next question comes from the line of James Goodall of Rothschild. Your line is now open.
Yeah, hi everyone. Thank you for taking my question. Just firstly, following up on Muneeba's question on AmEx, has there been any changes in commercial terms with AmEx as a result of the new agreement? How should we think about the cash remuneration element going forward? Secondly, just given the strong on-time performance in all entities in Q3, can you quantify what the benefit was to both revenue and costs from lower disruption in the quarter, please? Thank you.
Yeah. I mean, on the AmEx card, it's a commercially sensitive agreement, so we can't really give any details in terms of the specifics overall, both in terms of kind of marginal cash at the moment for everyone and things.
No, just to say, I think that's right. Clearly, we're very happy with that agreement. It works for both us and American Express, and we're very pleased to have extended it for the long term.
Okay. Around the disruption cost, in the case of the AEDs, the costs were almost half, 45% less than the cost that we had last year.
Thank you.
Your next question comes from the line of Jarrod Castle of UBS. Your line is now open.
Good morning, everyone. Too as well. Seems like the MRO business is doing pretty well. If you could just give a little bit more color in terms of pipeline of work and what you're seeing there. Just secondly, I mean, a lot of attention to Loyalty. Obviously, the changes happened, I think it was April this year. Loyalty members, they're going to get their tier status, I would imagine, sometime in March next year. Just interested, within the different tiers, gold, silver, bronze at BA, has the mix changed, i.e., are some of the gold members as a percent of total mix slipping down or some of the silver going up? What are signings like into the Loyalty program at the moment? Any color and how you see that evolving going into March? Thanks.
Maybe Marco, you want to comment on the MRO, mainly the engine business?
Yeah. The engine business is still cycling over the post-COVID phase. So indeed, as you say, it's recuperating. You see that a lot of the non-airline revenue growth has been driven by the growth of maintenance. So it's coming back to pre-COVID levels of profitability. And we're currently in the phase of setting the stages of the next longer-term view of the strategic opportunities there. So I think we will come back in time on that.
In relation to the club and the relaunch, I think it's performing as we would expect. I think the tier sizes are broadly tracking the way they were last year. We are hearing anecdotes of people who are higher-value customers getting their tier quicker. We do not expect to see too much movement in terms of tier sizes. We do think that the club tiers will be rewarding our higher-revenue customers more quickly and more fairly.
Yeah. I think I'd add to that, just in terms of the club, you asked about where the numbers are. We are still seeing some good growth in terms of people joining the club, both in terms of the BA club and the Iberia club. Active members, so that's somebody who's done something in the last 12 months, is up double-digit. We're seeing a lot of activity. We're also starting to see, which we talked about last quarter, people increasingly using BA Holidays as a method of obtaining tier points. That's another trend that we're seeing.
Great. Thanks. Thank you.
Your next question comes from the line of Alex Paterson of Peel Hunt, your line is now open.
Yeah. Morning, everybody. Yeah. Just continuing that theme of holiday sales to BA club members, has that really benefited the third quarter? If I look ahead, the number of ATOLs that you have paid for is flat year on year. If I think about then where is the growth in IAG Loyalty going to come from? If it's not from the number of holidays, are you going more upscale, or is the growth going to come from more Avios issuance?
Yeah. Thanks for that. Yeah. In terms of club members, yes, we are seeing more revenue coming from club members. That's up on where we were in terms of if you look at it year to date. We are expecting that to continue. You're right in thinking that the quality of revenue that comes from those members tends to be strong. That's definitely where we're seeing some of the growth. In terms of ATOLs, I've always said that ATOLs are a bit of an art rather than a science. We certainly plan to grow the business into 2026. In Q3, we definitely saw that growth in a lot of areas. I would highlight Greece as probably the region that's had its strongest summer, certainly for us. Yeah, that growth continues.
Thank you.
There are no further questions. I will now hand back to Luis Gallego for final remarks.
Okay. Thank you very much, everybody, for being here today. As we said at the beginning, a strong set of results, positive trend in bookings for the first quarter and first quarter. We are going to continue executing our strategy that is delivering better results than average. Thank you very much.