IAG CEO Willie Walsh at CAPA’s Airlines in Transition conference in Dublin said (11-Apr-2013) Vueling, whose board has recommended approval for IAG’s takeover, will be a “standalone entity, a separate brand” managed by a different management team. Mr Walsh made clear Vueling “will not be merged by Iberia”. Mr Walsh said Iberia and Vueling could cooperate but “will do so only if it adds value to the shareholders”. Commenting on multi-brand strategies, Mr Walsh said a holistic assessment is needed. “You need the total business to be profitable to succeed,” Mr Walsh said.
AIT Dublin: Vueling will not be merged into Iberia: Walsh
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Air France-KLM, IAG, Lufthansa LCC strategies: denial, submission, retreat, now counter-attack
Over 20 years the responses of Europe's big three legacy groups to the short/medium haul LCC revolution have all been through phases of denial, submission, retreat, and counter-attack.
Now all three now have a more clearly defined LCC strategy than in the past. IAG, with Vueling and Iberia Express, has the largest, most pan-European and most profitable LCC, helping the group to grow its short/medium haul traffic. The Lufthansa and Air France-KLM LCCs are more defensive, to preserve market share. Both have only recently started LCC bases outside their original home markets. Lufthansa (after a false start with high cost Germanwings, now transferring to Eurowings) has replaced mainline capacity with LCC capacity, route-for-route. Air France-KLM has grown Transavia while cutting mainline capacity, but without substitutions route-for-route.
Only Lufthansa has taken its LCC onto long haul routes, albeit on a limited scale. Facing the more complex challenges on long haul, all three are developing a growing range of partnerships with other airlines. They have also sought to improve labour productivity in their legacy network airlines, with varying degrees of success, but again led by IAG. A next step may even be to connect with their arch rivals.
IAG keeps FY2016 guidance in spite of weak unit revenue as 1Q2016 results benefit from low fuel
IAG's financial results for 1Q2016 are the first indication from a leading European legacy airline group of how this year is working out financially. For IAG the seasonally weak first quarter went well, with operating profit increasing by more than six times and the net result recording a rare positive figure.
Unit revenue weakness, seen in 2015, continued into 1Q2016 and accelerated its fall after the Brussels terrorist attacks. Coming relatively soon after the Paris attacks, this event may have a slightly longer impact than previous incidents of this nature. IAG's unit cost fell more rapidly than unit revenue, thanks to lower fuel prices. With pricing expected to remain a little softer than previously anticipated, IAG is accelerating cost measures and expects underlying ex fuel unit cost to fall by 1% in FY2016.
IAG still expects more than EUR900 million of year-on-year operating profit improvement in 2016, with a further margin increase. The IAG group is already the most profitable of Europe's three leading legacy airline groups, and the gap looks set to widen this year.