Iberia CEO Rafael Sánchez Lozano reportedly said the upcoming strike by workers is "suicidal", "absolutely incomprehensible" and "very bad for the company and for Spain". Mr Sánchez Lozano, as quoted by El Economist, said there is no alternative to the carrier's proposed 4500 layoffs, saying, "Every redundancy is a personal tragedy, but I have to give a solution to the problem, because if not there are another 15500 employees will also go". On cuts to destinations and Iberia's leadership position in Latin America, Mr Sánchez Lozano said, "What is very dangerous is trying to sustain a leadership position with feet of clay, and maintaining routes that lose money.... Spain has a natural market in Latin America, the largest in Europe, if we are competitive and profitable we can be the leaders."
Iberia CEO comments on 'suicidal' strike and maintaining leadership in Latin American market
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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.