Air Europa will need its lower costs and higher growth to face renewed competition from Iberia

IAG's recent announcement that Iberia is to receive 16 new widebodies marks a shift of emphasis for Iberia from internal restructuring towards a new competitive growth phase. Rival Air Europa has taken advantage of Iberia's capacity cuts in recent years to pursue international growth, particularly to Latin America. Parent company Globalia does not report profits for Air Europa, but the group's annual report shows 2013 was very successful for increased revenues, load factor and RASK. It also saw Globalia's return to profit, while Iberia was still posting losses in 2013. Moreover, Air Europa already has its own widebody order (eight Boeing 787-8s and options for eight more).

However, Iberia returned to profit in 1H2014 and its CEO Luis Gallego is relaxed about competing with Air Europa, saying Iberia is "three times [its] size at [Madrid Airport] and twice its size in Spain" and can now "compete with anyone" thanks to its new cost structure (Europa Press/Preferente, 22-Jun-2014).

This analysis of the available data on Air Europa's traffic and financial performance will be followed by our updated analysis of its strategic positioning.