Iberia: the Futuro looks bright for IAG's star pupil as its confidence and growth are transformed

Iberia is emerging as the star pupil in the IAG airline academy, studiously following its 'Plan de Futuro' restructuring programme. It has learnt how to achieve labour productivity improvements and unit cost reductions. With Iberia Express, it has demonstrated it is possible for legacy airlines to launch subsidiaries that combine an LCC cost base with a full service brand.

After receiving punitive beatings in the form of capacity reductions, its diligence is now being rewarded with new aircraft orders and double digit ASK growth in 2015, thanks largely to Latin American expansion (and returning to routes suspended during its restructuring). Brimming with new-found confidence, Iberia is IAG's biggest contributor to ASK growth in 2015.

Iberia is not yet qualified to graduate by recovering its cost of capital, but is on track to achieve this, in accordance with IAG's target, by 2017. As with all airlines, sustainable profitability may require some benevolence from the macro environment, which can deliver harsh movements in unit revenue and in fuel prices. However, Iberia's sharp focus on labour CASK, fuel efficiency and non-fuel overheads should soften the impact of any deterioration in external conditions.