Asiana Airlines reportedly expects to report record 1Q2010 results, with passenger and cargo traffic reportedly increasing 31.2% and 27.6% year-on-year, respectively, with profits also up in both sectors in the quarter, which is traditionally a low-season in Korea (Korea Times, 11-Apr-2010). The result is reportedly prompting Kumho Group creditors to consider giving Asiana more time to recover without creditor involvement, with a decision regarding Asiana reportedly expected to be announced at the end of Apr-2010. However, a key concern remains Asiana's high debt levels, currently standing at KRW3.7 trillion (USD3.3 billion), and reportedly increasing by KRW200 billion (USD181 million) p/a due to interest expenses.
Asiana Airlines reportedly improved results in 1Q2010: reports
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Vueling NEXT Part 2: new CEO to lead IAG's LCC in restructuring bid to achieve IAG targets
Vueling's new CEO, Javier Sanchez-Prieto, is leading a programme ('Vueling NEXT') to improve its profitability, both through revenue enhancement and cost efficiency gains. Among other aims this hopes to reduce Vueling's high levels of seasonality, to raise aircraft utilisation and to improve labour productivity. Given ambitious financial targets by IAG – action is needed.
Part 1 of CAPA's analysis of Vueling examined its capacity growth and profitability trends since its acquisition by IAG in 2013. Vueling's operating margin and return on invested capital are on a downward trend, hence the new initiative to reverse these trends.
This second part of CAPA's analysis considers the profit improvement programme. During this programme Vueling's fleet will remain broadly flat to 2018, before resuming growth thereafter. Focus markets for Vueling are domestic Spain and Spain-Europe. It has strengths in these markets but faces growing competition from its lower-cost rival Ryanair, which has also been raising its service quality – closing the gap to Vueling's more premium positioning on the LCC spectrum.
Vueling NEXT Part 1: return on capital falls to make IAG's LCC the group's poorest performer
Since the end of 2015 Vueling has slipped from being IAG's best performer on the key financial metric of return on invested capital to its worst performer for the four quarters ended 3Q2016. The group's LCC has suffered more than its sister airlines from disruption in Europe, caused by ATC strikes and terrorist activity.
However, since its acquisition by IAG in 2013 Vueling's revenue growth has not matched its capacity growth and unit costs have grown. The benefits of lower fuel prices have been dissipated by higher ex-fuel unit costs, including lower labour productivity. Vueling's new CEO, Javier Sanchez-Prieto, is now leading a programme ('Vueling NEXT') to improve its profitability.
Part 1 of this CAPA analysis of Vueling examines its capacity growth and profitability trends since becoming part of IAG. It also looks at the development of its RASK and CASK. Part two will highlight the seasonality in Vueling's schedule and look at the profit improvement programme.