International Consolidated Airlines Group S.A. (OTCPK:ICAGY) Q1 2024 Earnings Conference Call May 10, 2024 3:00 AM ET
Company Participants
Luis Gallego – CEO
Nicholas Cadbury – CFO
Lynne Embleton – CEO, Aer Lingus
Carolina Martinoli – CEO, Vueling
Marco Sansavini – CEO & Chairman, Iberia
Sean Doyle – Chairman & CEO, British Airways
Adam Daniels – CEO, IAG Loyalty
Conference Call Participants
Andrew Lobbenberg – Barclays
James Hollins – BNP Paribas
Harry Gowers – JPMorgan
Savi Syth – Raymond James
Stephen Furlong – Davy
Sathish Sivakumar – Citi
Jarrod Castle – UBS
Guilherme Sampaio – CaixaBank
Alex Irving – Bernstein
Jaime Rowbotham – Deutsche Bank
Conor Dwyer – Morgan Stanley
Operator
Good day and thank you for standing by. Welcome to the First Quarter 2024 International Airlines Group Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be the question-and-answer session. (Operator Instructions). Please be advised that today’s conference is being recorded.
I would now like to hand the conference over to your speaker today, Luis Gallego, CEO. Please go ahead.
Luis Gallego
Thank you very much. Good morning, and welcome to the IAG Trading Update for the first quarter of 2024. With me today are Nicholas Cadbury as well as members of the IAG Management Committee.
I am pleased to announce that this has been a very good first quarter for IAG. We have seen a strong demand in most of our markets, and in particular, our three core markets of the North Atlantic, South Atlantic and in Europe. This has driven increased unit revenue versus same quarter last year in the North Atlantic and Europe and supported the high capacity investments we are making in Latin America. This has been helped by good Easter holiday trading. As a result, our revenue has increased by over 9% to €6.4 billion. And we have delivered operating profit of €68 million, a €59 million increase compared to the first quarter last year.
We are continuing to invest in our businesses to deliver customer and operational benefits that will sustain best-in-class margins over the long-term. Unit costs were as we expected, so a little bit higher in the first quarter than they will be for the rest of the year due to the timings of this investment. We are already seeing the benefits, in particular, in BA’s operational performance.
Our balance sheet continues to strengthen at 1.3x leverage compared to 2.1x at first quarter last year due to our strong performance and focus on free cash flow. And finally, we are well-positioned for the summer.
On that note, I will pass you to Nicholas for more detail about our financial performance.
Nicholas Cadbury
Thank you, Luis, and good morning, everyone.
In this section, we will review the financial performance of IAG for the first quarter, highlighting the key revenue and cost drivers and our strong balance sheet.
I’ll start with the profit bridge, walking through both the drivers of the improvement in profit since last year and then the results by each operating company. On the left on this slide, you can see the increase in revenue has been the biggest profit driver combined with the increase in capacity with strong unit revenue growth and benefiting from the timing of an early Easter.
Cargo revenue was down on last year, which was when we were seeing high cargo demand due to the supply chain disruptions in the market. Non-fuel and fuel costs reflect the higher level of flying activity in the year. On the right, that you can see all of our airlines, except for Aer Lingus have improved their profits year-on-year, which I’ll come back to later.
This page shows our key metrics for quarter one. We continued to invest in our network, increasing capacity by 7%. At the same time, our passenger unit revenue or PRASK increased plus 4.4% compared with the last year with our load factor up 1.6% and our yields up 2.4%. All our airlines saw an increase in their PRASK with the largest increase at Aer Lingus and Vueling, both of which have a high mix of leisure passengers.
Our non-fuel costs increased by 3.7%, in line with our expectations for the quarter, but higher than our expectations for the full year. This higher Q1 reflects the timing that employee pay deals, recruitment, aircraft deliveries and inflation materialized last year. For the full year, we continue to be confident that non-fuel CASK will increase in line with the guidance we gave in March, up slightly on last year.
These revenue and cost metrics have delivered another profitable first quarter, generating €68 million in operating profit, which is €59 million improvement year-on-year. We further reduced our net debt to €7.4 billion with leverage at 1.3x EBITDA, significantly lower than the end of last year and compared to Q1 last year. These results continue to demonstrate the strength of our business and brands, coupled with our unique disciplined approach to capital allocation and our transformation initiatives.
This slide is a breakdown of performance by business with most of our businesses delivering an improved profit performance during the quarter. Aer Lingus is a highly seasonal business and typically makes a loss in Q1. Capacity grew by 4%, but the loss remained broadly flat year-on-year with a small improvement in operating loss margins. British Airways profit increased to £22 million, driven by the strength in the North Atlantic and Iberia built on its performance last year by delivering another record profit in the quarter, reflecting robust market demand in their core Atlantic and European markets.
Vueling was the standout year-on-year performer. Vueling delivered a strong revenue and cost metrics in the quarter driven by the high exposure to leisure traffic, and again, benefiting from the timing of Easter.
Lastly, our Loyalty business also built on the strong performance last year by growing profit to €80 million, showing the benefit of their non-seasonal business model.
Turning to our revenue performance. This slide shows our revenue performance in terms of capacity and passenger unit revenue. Overall, we saw strong demand in the quarter driving high revenue and an increase in unit revenue across most of our geographies. We’re particularly pleased with the performance in our core profit pool markets of North Atlantic, Latin America, Caribbean and Europe.
In the North Atlantic, we had an improvement in unit revenue growth compared to Q4 last year with all our airlines seeing an increase in unit revenue on last year. Given its relative size, the improved performance was principally driven by British Airways. We saw strong unit revenue growth on broadly flat capacity, benefiting from both business and leisure volumes growing ahead of capacity in the quarter. Latin America and the Caribbean performed very strongly. Our investment in the region saw capacity increasing by 14%. This level of investments typically takes time to mature, but robust market demand, particularly from visiting friends and relatives and leisure segment drove only a slight reduction in unit revenue performance.
Our capacity was broadly flat in Africa, the Middle East, and South Asia, but we saw a 4% decline in unit revenue, largely reflecting the ongoing conflict in Israel and Gaza and competitor capacity growth in India. Asia-Pacific, which is only around about 4% of our ASKs, saw the largest capacity growth with British Airways continuing to recover to 43% of IAG’s pre-COVID levels of capacity.
The unit revenue declines in this market reflecting the timing of reentering markets and weakness in demand from China. Our short-haul geographies performed particularly strongly in the quarter with strong leisure demand and a good Easter holiday period.
In Europe, all our airlines except Vueling grew capacity to satisfy strong demand, and all our airlines increased unit revenue in the quarter. Routes to Italy, France and the UK were particularly strong performers.
This next slide shows our results after tax with a loss of €4 million. This was an improvement year-on-year at both pre and post-tax levels. I would just highlight the tax line where the benefit from a one-off exceptional non-cash credit of €89 million relating to a constitutional court ruling in Spain earlier this year. This court ruling allowed our Spanish businesses to be able to recognize higher previous year’s tax losses.
This chart shows our balance sheet and liquidity positions. As you can see, our balance sheet remained strong with a reduction in both net debt and leverage reflecting our strong performance and positive seasonal working capital flows.
CapEx guidance, which, as a reminder is gross, not net CapEx, remains unchanged at €3.7 billion for the full year 2024. And I wanted to highlight that the next quarter sees a peak in our aircraft deliveries with quarter two accounting for around about seven of the 21 aircraft delivered in the quarter.
To conclude, we are pleased with the operational and financial performance of the business and we have strong conviction in the future free cash flow creation of the group this year and beyond.
And at that point, I will leave you now in the hands of Luis.
Luis Gallego
Thank you, Nicholas.
I will now briefly talk about some of the strategic initiatives that our operating companies are carrying out that will help us to achieve our financial and non-financial objectives in the medium and long-term. As always, these are focused on our strategic framework of strengthening our core, including strengthening our global leadership positions and strengthening our portfolio of world-class brands, driving earnings through our asset-light businesses and operating under our strengthened financial and sustainability framework.
Aer Lingus continue to focus on its unique North Atlantic position, building to 21 destinations in North America with a return to Minneapolis last month and adding Denver later this month as well as broadening its short-haul network of popular European destinations.
As mentioned earlier, British Airways is at the forefront of our customer and operations investment. They continue to recover their long-haul network such as the recent return to Abu Dhabi as well as the returns to Bangkok and Kuala Lumpur this coming winter. And their transformation program includes investing in new digital systems that are already helping to deliver improvements.
Iberia are continuing to build on their recent strong performance. Their capacity investment is very focused, in particular, by adding frequencies to core cities in Latin America as well as in the European and domestic short-haul network. They also continue to drive improvements to customer proposition, such as customer assistance and improving food and service on Board.
Vueling’s network strategy is still to analyze their schedule to winter/sun destinations and mainly through aircraft utilization. As you could expect, they are focused on improving the way they serve their customers in an efficient but helpful way, such as through self-service disruption technologies.
And finally, Loyalty continues to focus on maximizing its earn and value proposition as well as expanding the number of ways you can earn Avios such as on Finnair flights now. It is offering members more ways to redeem them. The transfer of BA holidays to Loyalty will be a key driver of value to both our customers and IAG’s airline brands.
And the outlook, we strongly believe that growing demand for travel will continue to be a long-term positive trend as we are seeing this year. So we are well-positioned for this summer. As we invest in our core Atlantic and European markets, our plans continue to be — to grow our overall capacity by around 7% in ASKs. And our investment in customer and operational benefits, which will allow us to maximize the benefit of a strong demand, means that we continue to expect non-fuel unit costs to increase slightly this year as previous guide. This obviously means that it will be there for the rest of the year. As mentioned at full year results, one of our key objectives is to generate significant free cash flow, which will allow us to maintain our strong balance sheet and to invest in the business. We remain focused on our strategy to deliver world-class margins and returns. And we are also committed to sustainable shareholder value creation and cash returns.
And now we hand over to Q&A.
Question-and-Answer Session
Operator
Thank you. (Operator Instructions).
And now we’re going to take our first question, and this comes from the line of Andrew Lobbenberg from Barclays. Your line is now open. Please ask your questions.
Andrew Lobbenberg
Good morning, guys. Can I ask, please, about the industrial relations situations at Aer Lingus, Vueling, and indeed in Spain where your structure of the scope agreement with Iberia Express, I think, all those things were in play when we spoke at the full year results. And then my second question would relate to the BA improvement plan. And could you update us please on how you’re going with the on-time performance and the Net Promoter Scores at BA? Thanks.
Luis Gallego
Okay. Good morning, Andrew. So Investor Relations, you know that we don’t deal with this at Group level. So maybe it’s better that the differential they can answer where we are. So Lynne, please?
Lynne Embleton
Yes. Hi Andrew, we’ve got, as you know, talks going with our pilots’ community with IALPA. That went to the Irish labor court over the last few weeks. So we’re still in process. We haven’t heard back yet from the labor court, and then we’ll take it from there.
Luis Gallego
And Marco, on Vueling, other one?
Carolina Martinoli
Okay. So hi, Andrew, this is Carolina. So we have started engaging with SEPLA at this point and are having constructive discussion, so yes, all going as planned.
Marco Sansavini
And also in Iberia and Iberia Express, constructive dialogue with both their representatives to work on the future.
Luis Gallego
And talking about BA, I think the improvement is clear. Punctuality for the first quarter was close to 80%. So it’s very similar to the punctuality that we have in 2019. And NPS is also going up. And maybe, Sean, you can expand on this.
Sean Doyle
Yes. Andrew, I think the other kind of backdrop is that while we’ve been driving punctuality, we’ve also been expanding the airline. So we had 10% more passengers in the first quarter, about 5% more ASKs. And as Luis said, that’s a 19 point improvement in on-time performance. I think it’s better than some of the similar hubs that operate in similar environments to us, so we’re very encouraged by that. And we also have a number of initiatives that we’d implement over the summer that will help build on that, that strong progress that we’ve made over the first quarter. So encouraging despite the fact that some days we’ve had a lot of external challenges that we’ve had to navigate through.
Operator
Now we’re going to take our next question, and the next question comes from the line of James Hollins from BNP Paribas. Your line is now open. Please ask your question.
James Hollins
Hi, good morning. Thank you. First, for Nicholas, I was wondering if you could, the most obvious question, give a bit of chat on Q2 pricing. There’s up, down, sideways given that Easter comp is tough. Maybe your view on Q2 consensus at €1.1 billion, which is down 13% year-on-year. And the second question, probably for Luis. Are we still seeing Madrid as the new Miami? Or a broader question, maybe some of the LatAm long trends and maybe on competitor capacity on LatAm for IAG (ph)?
Nicholas Cadbury
Hi James, thank you for that. We don’t usually kind of give quarterly guidance overall. I mean, you can see we haven’t given full year guidance overall, particularly on kind of PRASK overall. I think one thing I would say about PRASK is for quarter two; we talked about actually just the timing of Easter, which pulled some sales forward. So you have potentially to have a kind of softer April as a result of that. We also had a very strong Q2 last year as well, and we’re adding 7% capacity. So kind of the combination of strong last year in capacity, you’d expect to have some impact in your PRASK overall in quarter two as well. Overall, over the full year, if you took the fuel price it is today, you’d expect more improvement in fuel ASK over the year, but actually just because of the seasonality, actually it’s slightly worse year-on-year in Q2 as well. So I think that’s kind of enough guidance on what I was going say on Q2.
Luis Gallego
Okay. And now about Madrid, yes, we continue seeing Madrid very strong. So Iberia is starting this year around more than 15% of capacity there. The RASK is performing well, almost flat RASK with that increase in capacity. And when we see the growth that Madrid hub to (indiscernible) is going to have this summer is going to continue strong, not only because of Iberia, also because of the competitor. We see also a strong premium traffic, lesser traffic that we didn’t have in the past. I don’t know, Marco, if you want to add something?
Marco Sansavini
Yes. If we look at all the investments we made in Q1, they are all performing extremely well, the increasing capacity that we had in Bogota, in Lima, in Santiago and Chile. And indeed, as you were referring to the sort of positioning of Madrid as the new Miami really continues. If we look at expenditure of tourism in Madrid, it kept growing. It grew in the first quarter 35% versus 2023. And in particular, the luxury tourism, so the premium economy and premium travel keeps increasing in a very, very significant manner. So we’re confident also that the continuous increases that we’re going to do also through the year, we’re going to still increase capacity through the year. In other Latin America destinations, we’ll continue to be performing very well.
Nicholas Cadbury
And your corporate revenue is up to about 95% to 96%. It’s certainly back to where it was in pre-COVID as well. Yes.
Marco Sansavini
Yes, in Latin America, yes.
James Hollins
So that’s — sorry, corporate revenue up 96% in Q1, was it?
Nicholas Cadbury
It’s about 95% of where — 96% of where it was pre-COVID as well. So it’s almost fully recovered as well (indiscernible).
Operator
And we’re going to take our next question. (Operator Instructions). And the next question comes from the line of Harry Gowers from JPMorgan. Your line is open. Please ask your question.
Harry Gowers
Good morning, everyone. First one, just on British Airways, if I can. It’s obviously early days in the transformation program. But I guess what sort of timeframe are you confident you can catch up that EBIT shortfall versus 2019 levels? And then the second one is on LatAm as well, if I can. I mean we’ve seen the U.S. carriers call out overcapacity and then some yield weakness going from the U.S. to LatAm. Is that a specific North America to LatAm issue do you think? I saw that your PRASK for LatAm was down a little bit in Q1. Is the competitive landscape from Europe to LatAm a little bit softer? Thanks a lot.
Nicholas Cadbury
Thanks, Harry. Hi, it’s Nicholas here. Just in terms of the timetable shortfall, so what Harry’s referring to there is in last year, we hit profit at just of €1.4 billion in BA, and pre-COVID we were at €1.9 billion. So we expect to get that back. We haven’t given a timetable for that, but given the strength of the market, we’d expect it over the kind of next year or two.
Luis Gallego
Yes. The second question I commented before, I think LatAm is very strong. We need to take into consideration that we are adding around 15% of increasing capacity. And even with that capacity, the RASK is well above the RASK that we have in 2019 and in line with the RASK that we had the previous year. So I think it’s a strong market. Maybe, Marco, you want?
Marco Sansavini
Indeed, also the comparison with 2019 confirms that we are with a high-double digit increase versus 2019 is very strong performance.
Operator
Now we’re going to take our next question. And the next question comes from the line of Savi Syth from Raymond James. Your line is open. Please ask your question.
Savi Syth
Hey, good morning. I was just wondering if you can expand a little bit on the corporate demand. I know you gave that for Iberia, but curious where it is overall and what the trend is? Is that kind of improving or stable? What you’re seeing on that front. And then for my second question, I know you kind of noted that the BA Holidays is going to move into Avios. I was curious what your plans there are and kind of the reasoning behind the move.
Luis Gallego
Okay. So first question about the corporate bookings and business traffic in general, we continue seeing a slow recovery. We had a good January and February in BA and Iberia, but we had a more negative mark mainly due to the timing of Easter. But in BA, the volume has increased in the first quarter around 5% if we compare with the first quarter of 2023. Revenues are — and yields are in line, but we see an increase in volumes.
And in Iberia, we are in a similar situation, but you know that in Iberia, the volume is around 85% in comparison with around 70% in British Airways. And we know that this is linked also to the number of people coming back to work that is different in Spain than in UK. So I think, in general, we have seen also a very strong recovery versus last year in our network to India.
And also as we are recovering the network to Asia, we see an increase in business traffic. So in general, we see the trend that we expected and we maintain EBIT to come back to 85% in volume, but it’s going to take longer. And maybe, Adam, you can comment on.
Adam Daniels
Sure. Very happy to. Yes, in terms of the BA Holidays question, we think bringing the two businesses together makes a lot of sense there. Two asset-light businesses that are growing very fast and we think we can continue that growth and probably speed it up by bringing the two businesses together and working more closely. So as an example, last year, we allowed customers booking BA Holidays to pay with their Avios to reduce the cost of their trip. And now we see 20% of all bookings on BA Holidays using, essentially reducing the cost of travel for them. So that’s the start of that. We think we have more potential to come, and we think bringing the business together makes a lot of sense.
Operator
Now we’re going to take our next question. And the next question comes from the line of Stephen Furlong from Davy. Your line is open. Please ask your question.
Stephen Furlong
Yes. Good morning, guys. Okay, what’s not been asked? Can I ask — I mean, you talked about April being a bit quieter, I guess, post-Easter blues. How is Europe going for the peak summer? Just — maybe just a general comment on that. Presumably, because you did mention that the businesses overall have become more seasonal, maybe with a bit more leisure and less corporate? Second, so that’s — yes. Second question maybe just on BA in terms of the traffic flows. Is it still very healthy in both directions on the Transatlantic? Are you expecting some stabilization in terms of the very strong demand from West to East? Or just general comments on where the passenger flows are coming from. Thank you.
Luis Gallego
Okay. Good morning. The first question, demand continues to be strong for the Q2 and Q3 and we are well-positioned for the summer. So the book position that we have for the Q2 is above 80% and for the Q3 above 40%. So in general, we are confident that we are going to have a good summer with the levels of corporate traffic that we are having and the increase that I said before we are considering. And maybe Sean, you want to comment on the second question?
Sean Doyle
Yes. I think we’re seeing, as we said, pretty robust demand in the North Atlantic. I think UK point of sale has been very strong. I think North Atlantic point of sale hasn’t been as strong, but it’s actually equally encouraging. I think on corporate, we have seen an expansion in the market in the first quarter on the North Atlantic of about 7% and we see that continuing as we look into the second quarter. So I think that business recovery is also very encouraging.
I think the final thing is the capacity into the UK is also moderating as we look into the summer. I think actually Heathrow capacity in the North Atlantic will be flat year-on-year. So they’re the sort of variables at play, and I think they play to the kind of strength that we’ve been talking about earlier.
Operator
Now we’re going to take our next question. (Operator Instructions). And the next question comes from the line of Sathish Sivakumar from Citi. Your line is open. Please ask your question.
Sathish Sivakumar
Yes. Thank you. I’ve got two questions here. First on the premium segment, can you actually give some color on like how the segment has performed? Where are the load factors are because last time you flagged that load factors are up on the premium segment. And also how the booking curve looks in the premium segment? And the second one is around the staff cost. If I look at Q1, it’s probably up 6.8%. Obviously, comps related to wage deal. But how should we see that evolve into quarter two and quarter three? Thank you.
Luis Gallego
Okay. So the first question, it depends on the different airlines. But for example, in British Airways, one sector that is performing well this year that was one of the weakest last year is IT technology. So they had an increase of 25% in revenues versus the first quarter in 2023. Entertainment is also high levels, energy. And the ones that are still lagging behind is banking and finance, pharma and education. So — but that situation is a little different if we look at Iberia, for example. So they have a strong sector in government and retail, but the others are still lagging behind. And the second question?
Nicholas Cadbury
The second question was about just kind of cost outlook overall. So we said that non-fuel CASK was up about 3.7% in Q1. And within that, employee costs were up 6% overall. And we still hold with our guidance that we’re going to be up slightly in terms of our full year non-fuel CASK. So therefore, it’s going to improve as we go through the rest of the year. The reason it was up in the Q1 was just about the timing of when we did our pay deals last year, which was potential Q2 and Q3 last year. So we just had a bigger jump in costs in Q1 overall. So we don’t give kind of guidance by individual cost line, but still holding a favorable and stable.
Operator
Now we’re going to take our next question. And the next question comes from the line of Jarrod Castle from UBS. Your line is open. Please ask your question.
Jarrod Castle
Thank you. Good morning, everyone. So firstly, just on Air Europa, I mean, where do things stand? And in very broad brush terms, are there any red lines where if you have to give away too many concessions where you just kind of walk away from the offer? And then secondly, I mean, you mentioned kind of shareholder returns or capital returns. But in terms of a roadmap, how close are we before you do something? Or what are you looking for before you kind of reinstitute some ordinary dividend, et cetera? Thanks.
Luis Gallego
Okay. About Air Europa, we continue working with the European Committee. After the stop of the clock, we have continued collaborating with them. And now we expect to have a solution for the deal around July if we don’t have more stop the clock. And yes, we are working with different options, different remedy takers in order to address the concerns that the commission can have. For sure, we can have the option to walk away if we consider that the remedies are above what we think makes sense for the Group. But I think we are still in the middle of the process. I think we are progressing well. But until July, we are not going to know anything new.
Nicholas Cadbury
Yes. Just in terms of the shareholder returns, I mean, it’s really just the same message we gave at the year-end. We said we were focusing on three key areas. One was to make sure we maintain our strong balance sheet, and you can see we had a leverage of 1.3x at the end of the quarter and we’ve talked about strong trading. So hopefully, we maintain a strong balance sheet. We talked about securing our capital plan, that’s done.
And the third thing was to get back to paying dividends as soon as we possibly can. And what we said at year-end is we said we continue to see the sales momentum as we did in the end of last year we gave that would not be far off. So it’s a Board decision, so I can’t give any more granularity of that. But we’re now shareholders, and our leverage and our balance sheet is in a good place. So when we get ready to do so, we’ll do so with confidence.
Operator
Now we’re going to take our next question. And the next question comes from the line of Guilherme Sampaio from CaixaBank. Your line is open. Please ask your question.
Guilherme Sampaio
Hello, good morning. Thank you for taking my question. The first one, if you could provide your thoughts on summer pricing trends across Europe. And second, is there any kind of quantification that you could provide on the Easter impact on unit revenues in Q1? Thank you.
Nicholas Cadbury
So is that about traffic trends across Europe was that.
Guilherme Sampaio
The pricing, pricing.
Nicholas Cadbury
Okay, pricing trends. We tend not to go into kind of individual pricing trends into markets overall. You can see across Europe overall that in Q1 we had kind of a good growth in ASKs. We had 9% growth in ASKs and our PRASK was up to some 6% overall. So it shows you the kind of strength of the leisure market.
And the second question was, Easter, yes. So yes, we’re not going to quantify kind of the demand with Easter. And the reason for that is there’s lots of moving parts, not just Easter, but also the timing of investments that we were making in the business, but also kind of when the inflation hits as well. So I think it would be misguiding just to kind of give you a number just for Easter overall. But as we said, it means we had a kind of particularly strong March and a little bit of a weaker April as a result of that.
Carolina Martinoli
Excuse me, Guilherme, any further questions?
Guilherme Sampaio
No. Just on pricing, I was referring more to the summer, not specifically to Q1.
Nicholas Cadbury
Yes. No, I’ve got that as well, but we don’t give individual pricing guidance, PRASK guidance. And what we said, I can give you — as we said earlier on is we’re seeing strong capacity growth across the business overall, and we had a strong summer. So both of those things together is going to impact PRASK overall. But overall, we’re seeing good demand. So it’s balancing those two together. So — but we’re not going to give individual guidance on PRASK by region.
Operator
Now we’re going to take our next question. And the next question comes from the line of Alex Irving from Bernstein. Your line is open. Please ask your question.
Alex Irving
Hi, good morning and hope all is well. Two from me, please. First, on unions. So one factor that’s helped you for a while has been that competition between your own Group airlines or investment. But now you’re seeing the pilot unions in the UK, Spain, Ireland heating up by signing an inter-union alliance. Do you expect that to reduce your ability to compartmentalize your unions and kind of spur that competition between the Group airlines? And more generally, what impact do you think it has, please? Second question is on technology. So we see that BA contracted with Nevio in the last quarter. What benefit do you expect this to bring versus your existing technology architecture on both a revenue and cost perspective and how significant would you expect this to be, please? Thank you.
Luis Gallego
Okay. About your first question, the model we have in the Group is that we negotiate locally the labor agreements and we have different labor agreements depending on the different characteristics of the airlines, the different markets they operate, the customer segments, et cetera. So — and right now, we have closed agreements with the major part of our people. We talked before that we are still awaiting the agreement with the Aer Lingus pilots, Vueling pilots and Marco is working also to have an agreement between Iberia and Iberia Express. But every deal is different. So I think from Group perspective, that’s the model we are going to continue, talking with our labor representatives locally and trying to close the best deal possible for the future of the employees and the business. And about technology in BA?
Sean Doyle
Yes. I think we outlined our vision for transforming our digital experience at CMD. And fair to say that we’re well advancing on that road. I think picking a technology partner with Amadeus Nevio for us makes sense because I think there’s a lot of experience and capability already built that we can adopt because some of this kind of capability we are using has also been trialed with other airlines.
In terms of the benefits that we expect to see, well, one, I think we’ll be able to price our inventory a lot more dynamically to-date than we do in the past. I think, two, we’ll have much better merchandising and retailing capability, a much more enhanced shopping basket functionality for users. Three, we expect, we’re seeing it actually in some of the prototypes that we’re trialing, to have higher book-to-look ratios. Four, I think we’ll also be able to integrate products such as Loyalty and Holidays into the booking flow far more effectively. And five, I think we’ll be a lot more dynamic in the way we can price the market ancillaries.
Now the final, I think, element you spoke about customers and servicing, what also I think this new capability will allow us to do is to service all of our price products online. And I think that will, I think give a huge amount of convenience to customers that they don’t have today. About 70% of our fare products today can be serviced online. We will get that to 100% when we complete the rollout of this new capability. So we’re at the start of the kind of investment cycle, but the early trends we are seeing with some of the prototypes are encouraging.
Operator
(Operator Instructions).
And now we’re going to take our next question, and the next question comes from the line of Jaime Rowbotham from Deutsche Bank. Your line is open. Please ask your question.
Jaime Rowbotham
Thanks. Good morning. Just one from me. Nicholas, it was helpful to hear you talk about the phasing of staff costs and how those might lead to lower non-fuel unit cost inflation in the rest of the year. Are there any other cost areas where we should be thinking along the same lines? Perhaps around aircraft ownership or engineering and maintenance where it’s going to look a bit different later in the year than it did in Q1? Thanks.
Nicholas Cadbury
I think if you look at our individual cost lines, you saw in Q1, we had higher — we had pretty flat supply and unit costs. You had a kind of 7% increase in employee costs and about 5% increase in ownership cost as well. So both those — latter two you’ll see kind of soften as you go through the year overall. And you’ll see kind of supply costs probably kick at a fairly stable level.
Operator
Now we’re going to take our next question. And the question comes from the line of Conor Dwyer from Morgan Stanley. Your line is open. Please ask your question.
Conor Dwyer
Hi guys, good morning. First question is just on the leverage, the 1.3 times. I think it’s also been €1 billion better than last year. Could you just comment on how much of that is perhaps seasonal benefits, timing of CapEx maybe that did or didn’t happen in Q1? And perhaps just give an indication of where you might expect that to be ending up for the end of this year as a bit more of a kind of helpful comparison for how it finished up at the end of last year. On the second question, which is a clarification question in terms of you were talking about the BA corporate volumes versus the Iberia corporate volumes. I think you said Iberia was at 85% recovered and BA was either 70% or 75%, I just didn’t quite catch that.
Nicholas Cadbury
Yes. Just on the corporate travel, yes, we said the BA volumes was about 70% overall and revenue outcome was 72% overall. Yes. So just in terms of our leverage, you’re right. Year-on-year, we brought our leverage down from €8.4 billion to €7.4 billion, so down €1 billion. And it was down about €2 billion on the year. So just focus on the end of the year to now. So a lot of that is about just one of it is our performance, but actually you get a big working capital inflow because you’ve got the bookings coming in for summer overall. But hopefully, the summer turns into profit and turns into — and changes in working capital into EBITDA overall. So we’re not giving kind of overall guidance, but hopefully, if we have that kind of strong performance that kind of consensus overall, you’d expect the leverage to come down from where it was last year.
Conor Dwyer
Okay. Perfect, so a year-over-year reduction, but just not indicating exactly how much?
Nicholas Cadbury
Correct, yes.
Operator
(Operator Instructions).
Dear speakers, there are no further questions. I would now like to hand the conference over to your speaker, Luis Gallego, for any closing remarks.
Luis Gallego
Well, thank you very much, everybody, for being here today. I think we have delivered another strong set of results. And we hope that we are going to continue in this way for the rest of the year. And as we said before, summer looks good. Demand is strong. And our transformation initiatives are delivering results. So thank you very much, everybody. Bye-bye.
Operator
That does conclude your conference for today. Thank you for participating. You may now all disconnect. Have a nice day.
