IAG's LEVEL starts four Barcelona routes to Americas; eyes Paris & Rome bases, Asia destinations


IAG's new long haul low cost airline LEVEL took to the air on 1-Jun-2017 with a Los Angeles service. This was followed by Oakland, Punta Cana and, on 17-Jun-2017, Buenos Aires. Launched in response to Norwegian's plans to start intercontinental routes from Barcelona, Level just pipped its rival to the post to become Spain's first long haul low cost airline service.

At the launch of LEVEL's first flight, IAG said that its new brand's sales were "well ahead of our expectations in all markets". According to IAG, LEVEL is expanding the market by attracting passengers that are flying long haul for the first time. Looking ahead, IAG plans to take LEVEL into other European cities, with Rome and Paris the favourites for its next base. It is also considering adding destinations in Asia.

Beyond the more analytical considerations of network design and competitor response, there is another less tangible factor that will be vital to LEVEL's long term success. This relates to the new airline's corporate culture. Initially operated and staffed by Iberia, the transition to Level's planned status as a fully autonomous airline within IAG will be crucial.

See related report: "Level": IAG's new long haul low cost brand to launch 4 routes from Barcelona, with more to come

Level: routes from Barcelona


Weekly frequency

Launch date

Non-stop competitor on route

Los Angeles



Norwegian, 2x weekly from 5-Jun-2017




Norwegian, 2x weekly from 7-Jun-2017; 3x from 23-Aug-2017

Punta Cana




Buenos Aires Ezeiza



Aerolineas Argentinas, 5x

LEVEL has prompted competitor reaction and comment

LEVEL's launch signals another phase in the development of the low cost long haul business model from Europe. Together with Norwegian's entry, it has prompted reaction and comment from a number of its competitors.

LATAM Peru CEO Felix Antelo has said that carriers must position themselves close to customers in order to anticipate their needs, noting that "one must be open to possibilities and understand where the trend is going" (Mercados Y Regiones, 14-Jun-2017).

Air Europa to move to unbundling. Low cost is infectious

Air Europa is the number two airline after Iberia on routes between Spain and Latin America. On Spain-US routes, It is the number two Spanish airline, but number five overall. However, its CEO Javier Hidalgo has called LEVEL a "fairy tale" that does not worry him.

"In the end the stories end", he said (El Economista, 26-Apr-2017). Referring to LEVEL's starting fares of EUR99, Mr Hidalgo was dismissive of the airline's ability to operate at this cost. "[…] you charge a ridiculous price and then add rates and rates for some or other concepts to cover the cost price," he said, "So yes, if you start to cheat with other charges just as if they fit the accounts."

Nevertheless, subsequent comments suggest that Mr Hidalgo has become less dismissive of LEVEL. Air Europa does not plan to launch its own long haul low cost airline, but plans to improves its competitiveness with LCCs through the unbundling of fares.

According to an article in Preferente (10-Jun-2017), he believes that Air Europa will have to operate in a similar way to LCCs in long haul operations, in order to compete with LEVEL and Norwegian.

Air Europa does not compete head to head with LEVEL from Barcelona, but it does serve Buenos Aires and Punta Cana from Madrid. The Barcelona routes offered by LEVEL and by Norwegian are likely to have some adverse impact on long haul traffic originating in the Barcelona area that connects via Madrid.

In addition to the modest repositioning signalled by Air Europa's unbundling plans, Norwegian and LEVEL probably influenced its thinking with respect to its new partnership with Ryanair. This allows Ryanair customers to book Air Europa long haul flights through Ryanair's website. In a second stage, Ryanair passengers will be able to book connecting flights from Madrid to Air Europa's long haul destinations.

See related report: Ryanair's next step to becoming a network airline: Air Europa long haul feed & Rome transfer product

Norwegian is competing with LEVEL on Barcelona to Los Angeles and Oakland; planning Buenos Aires

Norwegian announced the launch of its long haul routes from Barcelona in Sep-2016. However, on Los Angeles and Oakland, where LEVEL and Norwegian are competing head to head, LEVEL's launch pre-empted Norwegian's by a few days.

Norwegian is also considering Barcelona to Buenos Aires, but has not yet announced a date for its entry. However, it has applied to Argentina's National Civil Aviation Administration for permission to operate international routes from a number of cities globally into Buenos Aires.

In addition, Norwegian is planning to launch a domestic start-up airline in Argentina and could become a more formidable competitor to Aerolineas Argentinas than LEVEL.

IAG's decision to launch LEVEL was clearly prompted by Norwegian's earlier plans to start long haul routes from Barcelona. For its part, Norwegian appears unconcerned by IAG's response to its plans. Speaking at the CAPA 2017 Americas Aviation Summit in Apr-2017, Norwegian's SVP Sales Lars Sande said "That’s OK... competition is good". Every airline in history has said that - But Norwegian probably mean it.

Aerolineas Argentinas may raise frequency on Barcelona-Buenos Aires

On Buenos Aires-Barcelona, Aerolineas Argentinas has been reported to be considering responding to LEVEL's launch and Norwegian's plans for a launch by increasing its weekly frequency from five to seven times (Cerodosbe, 26-Apr-2017).  Prior to LEVEL's entry on this route, Aerolineas Argentias was the only operator.

LEVEL has stimulated new customers

IAG established LEVEL to exploit what it considered to be a profitable opportunity in low cost long haul, but which it did not consider its existing brands could address successfully.

IAG CEO Willie Walsh told the CAPA Airline Leader Summit in May-2017: "We didn't think we could stretch our existing brands into that customer segment, so we decided to create a new brand." Mr Walsh believes that IAG can make money in this segment.

A CAPA TV interview with Mr Walsh at the CAPA Airline Leader Summit can be seen at the following link:

It is early days in terms of assessing LEVEL's market impact. Nevertheless, it seems that IAG may be stimulating a new customer segment with its launch.

At the IATA AGM on 5-Jun-2017, Mr Walsh said, "This past week we launched a new operation initially between Barcelona and Los Angeles with passengers flying for the first time based on customer demographic we analysed", he said.

Vueling can handle additional connecting traffic

One of the key factors in IAG's choice of Barcelona as Level's first base was the strong presence of its LCC subsidiary Vueling at the airport. Vueling CEO Javier Sánchez-Prieto has called LEVEL "a natural response to the market" (El Espanol, 08-May-2017).

He said: "There's a passenger that was born with the low cost aviation. That always flew low cost. The transition to long haul is natural, they don't want to pay for a better seat, for inflight food or an extra bag. Or they do, but they will decide".

Mr Sánchez-Prieto has expressed confidence in his airline's ability to handle the connecting traffic generated by Level, noting that Vueling is already connecting "the big boys" from LATAM Airlines Group, American Airlines and Qatar Airways.

LEVEL is part of IAG's Avios loyalty scheme; developing codeshares

One feature that might help to differentiate LEVEL from other long haul low cost operators - in particular, Norwegian - is that its flights offer customers points with IAG's loyalty scheme Avios, redeemable on the group's network of 380 destinations.

More particularly, Vueling has 124 short/medium haul destinations from Barcelona, versus Norwegian's 23 (week of 19-Jun-2017, source: OAG).

In addition, LEVEL's distribution reach is widened by the ability for passengers to book its flights on the Iberia and Vueling websites in addition to the long haul LCC's own website. Iberia and Vueling passengers can book flights to Barcelona and an onward Level connection with a single ticket.

In addition to codesharing with Vueling on all four of its launch routes (the first examples of the VY code's being carried across the Atlantic), LEVEL has also commenced a codeshare agreement with American Airlines on its Barcelona-Los Angeles and Barcelona-Oakland services.

LEVEL has joined IAG Cargo

LEVEL also has one more string to its bow: it is part of IAG Cargo. This makes it the fifth airline brand to join IAG Cargo, alongside British Airways, Iberia, Aer Lingus and Vueling. It provides IAG Cargo with a new long haul, widebody cargo gateway in Barcelona increasing the group's capacity to the Americas.

This is unlikely to be a major driver of demand for LEVEL's network expansion, but could provide it with an additional revenue stream adding to its profitability. Norwegian also offers cargo, but on a relatively limited scale and without the potential synergies deriving from being part of a larger cargo group.

If LEVEL's cargo business is successful, the additional revenue stream could enable it to keep its passenger fares lower. Conversely, it could also be a distraction and dilute LEVEL's focus from its core offering of low fare passenger travel.

Corporate structure/management of Level is evolving

LEVEL's corporate structure and management is still evolving. For now, LEVEL is using Iberia pilots and cabin crew and flights operate under an IB code.

This required IAG to reach an agreement with Iberia pilots, which was was signed between Sindicato Espanol de Pilotos de Lineas Aereas (Spanish Airline Pilots Union – SEPLA) delegates and Iberia in May-2017, to last until 31-Dec-2017. Although using staff from Iberia, LEVEL pilots' annual working hours limit has been raised to 900 hours from 850 at Iberia.

Nevertheless, after its initial phase IAG plans to establish LEVEL as a stand alone company with a new corporate structure. It will eventually have its own AOC and, presumably, recruit its own staff.

Experience from elsewhere in the industry suggests that LEVEL's longer term chances of success will be enhanced if it can create a truly stand alone organisational culture.

Practicalities and the timing of Norwegian's entry into long haul from Barcelona, forced IAG to launch LEVEL using Iberia personnel. Although this is only an interim phase, this may hamper its chances of establishing its own distinct culture as it will have been strongly influenced by Iberia (and IAG Cargo) in its crucial early stages.

LEVEL plans to expand to five aircraft in 2018

Managing the transition from the initial phase to LEVEL's eventual status as a fully fledged autonomous airline within the IAG structure will be particularly important as it sets up bases in other cities across Europe.

IAG's ambitions for LEVEL include adding a third A330-200 aircraft by the end of 2017 and taking the fleet to five aircraft in 2018 (all with 314 seats). It is also reported to be considering the A350 as part of its future fleet development (lavanguardia.com/sepla.es, 01-Jun-2017). This is to be expected given the unit cost advantages of the newer generation A350 technology.

Rome and Paris are possible new bases for LEVEL

LEVEL's plans to expand beyond Barcelona to other European bases next year include Rome and Paris, which are Vueling's next two biggest cities by seats after Barcelona.

Vueling: top 10 airports by seats week of 19-Jun-2017

Rome FCO is Vueling's second largest base after Barcelona and the airport also has a relatively small existing long haul network, giving potential for growth. Vueling is the second largest airline by seats at FCO, with 8.5% of seats after Alitalia, with 40.4%.

Alitalia's restructuring and sale could provide opportunities for further growth at Rome, although it is currently still growing on long haul.

See related report: Alitalia in administration: attempts business as usual with long haul growth; labour unrest remains

Paris Orly is Vueling's number three airport and has a strong leisure focus. Vueling is the fourth largest airline by seats at Orly, after Air France, Transavia and easyJet.

Vueling also has a smaller presence at Paris CDG, where it is the number five airline (after Air France, easyJet, Delta and Lufthansa), but with only around one third of its Orly capacity (data source: OAG, week of 19-Jun-2017).

LEVEL may add Asia to its network

In addition to destinations in the Americas, LEVEL is also thought to be studying potential new destinations in Asia. The immediate spur of reacting to Norwegian's trans-Atlantic launch from Barcelona is not yet reflected in the market to Asia.

Nevertheless, low cost long haul competition between Europe and Asia is growing. Norwegian is considering the expansion of its Europe-Asia network beyond its existing Bangkok network and its planned London Gatwick-Singapore launch in Sep-2017

See related reports:

The Lufthansa Group's Eurowings already has a growing Asian operation. Moreover, Singapore Airlines' subsidiary Scoot is launching Singapore-Athens and, although Air Asia X has shelved plans to return to Europe for now, it still hopes to do so at some point in the future.

See related report: Singapore Airlines needs to accelerate Scoot expansion in Europe: long haul low cost Part 4

In addition to this emerging low cost competition on Asian routes from Europe, IAG faces well established and strong competition from the Gulf airlines. It has partially embraced this through is partnership with Qatar Airways, but the extension of LEVEL's network into Asia will give it more competitive options in the region.

Long haul low cost from Europe has so far been predominantly a trans-Atlantic phenomenon, but this is changing and IAG needs a flexible global response as the competitive landscape evolves in all regions.

Moreover, if LEVEL is successful, there will also be markets in which it can take the initiative, rather than just respond to competition.

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