Airline Leader Interview, Iberia & British Airways, Director Latin America Marina Colunga

Transcript

Marina Colunga:Thank you for having us. It's a pleasure for us to be here, for me to be here.

Lori Ranson:Yeah, so in with Iberia in particular, there are a lot of milestones that are happening in the region this year. So 20 years in Uruguay and 75 years in Puerto Rico, and that's on top of record season growth. Can you just tell us what's driving the growth in the region for the airline?

Marina Colunga:It is— if I had to resume our strategy, I would say that the— it's been laser-focused in expanding our footprint in the region. As you were saying, we, we had a history of communicating Latin America with Europe. We actually turn 80 years this year connecting on our first flight from Madrid to Buenos Aires via Rio. And the, the reason why, it's because Latin America has a continued appetite to continue traveling. The, the Iberia strategy has always been focused on, on delivering a good service and, and expanding the, the horizons. We are now serving 142 destinations out of Madrid on our hub. And Latin America, after the pandemic, we learned that Latin America has a lot of appetite to continue discovering the world. I'm happy to report that being laser-focused has, uh, driven very good results for us. Just to give you a little bit of insight on numbers, when we compare the performance of Iberia in Latin America, we are growing 60% towards last year, which was already a world of record, a year of records, and we have surpassed our pre-pandemic levels in terms of incomes coming from Latin America. We are serving 18 different airports, 16 different countries, and the, the, the continued aim is expand footprint, expand the promise, and getting the Latin American travelers the opportunity to discover the new Iberia. While having this many years in the, in the industry or traveling to Latin America provide us a very good or a strong position in terms of brand recognition, on the flip side, it also brings some sort of previous experiences with Iberia. Iberia has evolved and has put their brand across an evolution in the last year, going from a public company to a private enterprise, and we are now dedicating our efforts on the Latin American customers discovering the new Iberia, discovering our new levels of services, our planes, our routes, and expanding our footprint across the entire region.

Lori Ranson:So there's a lot of opportunity for Iberia as you just described. It would be interesting to to get the perspective of a longer-haul carrier in terms of challenges of operating in the region. We've heard some of the challenges over the last couple of days, so it would be good to get your view.

Marina Colunga:I think it's— for those which are— I'm Latin American. I'm Argentinian. I was living in different countries across the region for my entire life. It's always hard to understand how Latin American cycles work, because there's always something. This year, at the beginning of the year, was a little bit of a pinch on the political environment in Ecuador. Then Argentina comes into place. A couple of weeks ago, it was Venezuela. But that's how Latin America operates. The regular operation in Latin America is a little bit unstable. stable. But with that said, we have discovered a successful path to secure that even considering all these situations that are beyond our control, we can provide an alternative and we can provide a service level that will continue to communicate Latin America with the world. Latin America Probably when we look at the high-level approach, Latin America might be perceived as one single business. But Latin America is a whole— way much more than one piece of a region. It's different countries with its own reality, with its own economy, with its own profile of customers. And there's a niche, very wealthy across Latin America, that continue to travel no matter what. It's way less sensitive sensitive than probably the rest of the economy. So when we look at the macroeconomic analysis of the countries, you might perceive some opportunities, but then when we look at our performance in these countries, we are exceeding expectations. Just to give you an example, we are growing capacity in Argentina. Argentina has gone through a number of changes in terms of political environment and economical environments. We are now growing capacity towards the end of the year with 3 flights a day. When you will look at the economy and when you will look at the indicators, you would probably have hesitations, but we continue to see this appetite for traveling across Latin America. It's a hard explanation when you are sitting outside Latin America, when you don't understand and we don't live, but fortunately enough, we have local teams that are super savvy on each of the countries that we serve. We have built a very strong network of connection, not only inter-regional but across the continents, and that provides us a very strong competitive advantage when it comes to the operational side and how to manage the opportunities or the challenges when they arise.

Lori Ranson:You mentioned sort of demand and demand sets. Has that changed since the pandemic in terms of traffic from Latin America to Europe and onward connections?

Marina Colunga:Definitely, that does. The Latin American, the origin, the point of commencement, Latin America continued to grow and continue to gain some room in terms of the contribution to our routes destination. I think it's a combination of different factors. We are growing capacity. And by growing capacity in across the region, that will allow us to increase the contribution of Latin America in the whole mix. But it's not just about capacity; it's also about the network. We are continue developing our network from the hub we have in Madrid. So probably back in the years when we talk about Iberia, we were only thinking on Madrid or Spain. Spain. And we are super proud of being a Spanish company. We are strongly positioning as probably the lead airline in Spain, but we've been working diligently on expanding this idea of being only a Spanish company, but the getaway from Madrid to the rest of the world. So we've been working very close on our alliance team. We have signed last year an alliance with Qatar that now opened the door of Asia with daily flights to Doha. We have expanded our network to new destinations such as Tirana, Ljubljana, Tromsø. And we will be launching now in the month of October a getaway to Narita from the hub in Madrid. Those new network opportunities open and feed the gateway from Latin America. We are not only the Spanish gateway to get to Europe. We are the entrance to the rest of the world for Latin Americans. Into that direction, we've discovered that the profile of the traveler has also switched or evolved into the leisure experience. Our shortest flight is 8 hours, so they're normally long flights. Going from Santiago de Chile to Madrid is a 13-hour flight, so people tend to spend more than 5 to 7 days, even if it's on a corporate trip. So this appetite to discover the world and combining corporate travel with leisure has proven to be a very successful mixed. And we continue to feed that idea, create— creating this Hola Madrid offer. Hola Madrid offer is a stopover that would allow you to stop in Madrid without any extra charge up to 9 nights on your way to final destinations. And then when we look at our destinations beyond Madrid, we have also discovered that, of course, in terms of volume, France Italy, UK, Germany are the top destinations, but has also discovered a new desire to, to add destinations that are probably not as familiar as they were before. There's a whole appetite of knowing different places or remote places that were not normally in the bucket list of traveling for anybody. So Tirana, Finlandia, Tromsø, or even in seasons to Romaniemi. Those are very good spots and have been very active in terms of the customer experience and preferences.

Lori Ranson:Yeah, that, that seems to be a theme because American mentioned that yesterday in terms of people want different locations, they want more exotic trips and want to go to more exotic places. So I just want to turn to fleet very briefly because another milestone that's coming up is delivery of the first A321neo. XLR to Iberia, and I know that's very exciting. Can you just explain how Iberia is going to incorporate that aircraft? I, I believe first, first flights will be to Boston and Washington.

Marina Colunga:They are, yeah. We are super excited about the addition of the LXR to our fleet. Those will be delivered in a timely manner. We are hoping to get the final 8 or to reach the 8 new planes by the end of 2025. As of today, the only 2 destinations that are confirmed, it's Boston and Washington. But it's not just how are we adapting the network or adding the network, but also the opportunity to, to include narrow-body operation into the long haul. Back in the, in time, we were the first airline in adding the A350neo. to our long haul for Argentina. Now we're going through that same path with the LXR, not because— and it's not just about capacity, it's about sustainability. Those planes are built on a very light component, so they will reduce the carbon emission. They will provide same levels of accommodation. We will have 14 flat seats on business, 160 economy. And I think that's a very important point. 68 economy seats with premium entertainment, 4K displays on TV. So it's a very well— it's a very good product, and we look forward to, to start pitching it to the market. Hopefully by the time of the delivery, we will be able to confirm the newest destination, but it's something that has been on the go.

Lori Ranson:And is it in the Americas, or Maybe it probably— yeah, it's probably, um, just to touch on sustainability because Iberia is doing a lot in that area. One interesting thing that the airline is doing is on the A350s, um, you're, you're doing water reduction on that aircraft, which is kind of interesting. Can you walk us through that?

Marina Colunga:Uh, yeah, there's a number of different, um, components of our sustainability efforts. While we probably can lead special actions toward reducing the use of water, reducing the single-use plastics, trying to be as digital as we can so we can eliminate all the paper, the big, the big centerpiece of our strategy is SAF, the sustainable airline fuel. Last year, just to give you some sort of a number, we had 53,000 tonnes of SAF fuel used in our airline. And we continue to add the conversation of sustainability into our commercial strategy once and over and over. Not only the LXR, but also the 350s are lighter flights. So that reduces the consumption of fuel, and that will also impact the overall emission, carbon emissions for those flights. We have, as AAG, we have a very clear commitment with reducing our carbon emission by 10%. Well, we want to get to 2050 by zero carbon emission, but to get to that milestone, we need to go step by step. So By the end of next year, we should reduce 10% of carbon emission with actions that are focused on SAF, focused on in-flight specific activations. And then by 2030, we should be able to provide a reduction of 20% of our flights in terms of carbon emissions. So it's not just one piece, it's some sort of system that needs to work, and we are working. Along with the training of our staff to be able to separate the waste on the plane, to reduce the food waste, not only the water but also the food. We are putting in front of our customer the option of selecting your menu so we can reduce food waste and into that affecting less carbon emissions. So it's not just one secret sauce ingredient. It's more like a strategy that compiles a number of actions that are driving us. And even into that direction, last year we were recognized by the AB Association as the 2nd airline across the world to reduce carbon— to reduce the carbon emission to the maximum. So we reached 70% reduction from 2019 to 2023.

Lori Ranson:You mentioned it kind of has to be a holistic approach, and that sort of popped a question in my head. We talk about all of the actions that airlines are taking, but you have to have employee buy-in as well. And is that a challenge, or how do you communicate that to your employees? Yeah, I think it's a challenge. the importance of sustainability to your employees?

Marina Colunga:It is true, and we're proud to be— to have sustainability as part of the core values of our company. When we first started talking today, I was telling you some changes or some evolutions that we had from the company, the public company to the private company. And part of that is not just the approach to commercial, but also the approach to the human resources. So we are working very diligently, not only with the crews, but also with our land operations and with our commercial operations, and also with our customers and with our partners to be able to secure that everybody has their goal aligned. We cannot continue to deliver the promise of reaching the zero carbon emissions by 2015 if we don't have the buy-in of those who actually do the work on the field. So there's a lot of training, there's a lot of service sequences that has been reviewed, there's a lot of development in terms of the, the digital environment that we're living these days in order to be able to reach that. And definitely The people portion of the strategy, it is there and continues to be there on a daily basis because otherwise we wouldn't be able to reach it.

Lori Ranson:There's been a lot of discussion about staff obviously here over the last couple of days and the challenges. From your perspective, can you go through some of the challenges, availability, pricing, things like that?

Marina Colunga:Yeah, probably the biggest challenges that we face is not different than what the industry is facing, is the fact that there's not enough SAF produced around the world to be able to, to provide. With that said, 12% of the global production of SAF last year was bought by Iberia. We are very active on the implementation of the SAF. SAF continues to be, in terms of profit, in terms of profitability, a little bit more expensive— not a little bit, way much more expensive than regular fuel. But we are working diligently on, on alliances such as the alliance we have with Repsol and alliances that we managed to build across Europe to be able to secure that whatever is available and what the supply is available, we can secure it. That's in terms of supply. But then our planes, our fleet, it is already, um, prepared for the usage of SAF. We do not need to adjust or make any adjustment to the fleet that we have. So as long as we can continue to be— to reach the number of SAF we need and we can control it, we can work with the industry in terms of trying to reach some sort of a pricing sense to the equation. We are ready to implement it in our flights. I mean, the discussion about carbon emission would be a lot way different if we would be able to have SAF for all the planes, even though we had 10% of our planes last year operating with SAF, which is quite an achievement.

Lori Ranson:Just turning back to Latin America for a moment, how has the decision not to acquire Air Europa changed the strategy?

Marina Colunga:I'm glad that you asked this because probably when we were looking at Iberia from the outside, you might feel or believe that we were aiming to have this to figure our strategy, which is not the case. We knew ever since the beginning, or ever since AIG communicated their intention to acquire Air Europa, that they were our competitors. And our strategy was not changed. We were operating on Latin America, having Air Europa as part of our competitors. And unfortunately, now that that acquisition will not occur, it didn't affect the overall strategy because we were not waiting for that to adjust our strategy. Probably it would be a little bit more complex, if that process will end up occurring, because that's where our strategy will probably need to be reshuffled. Because we were not looking into that acquisition to build our strategy. Our strategy is footprint expansion, laser focus on revenues, laser focus on customer experience, laser focus on continue adding network opportunities. And, and that will continue to be the same. So it is unfortunately, of course, but we tend to believe that that was the best for the AEG group. So it's a good place to be.

Lori Ranson:So it's business as usual?

Marina Colunga:Correct.

Lori Ranson:Pretty much. Um, what sort of network opportunities are left for the group, um, and Iberia specifically in Latin America as you look forward?

Marina Colunga:Well, we are expanding capacity again. We The, the, the, the bet or the, the vision is for now is to, to really become the number one or the leader in the routes we serve. So we are not expanding in terms of additional airports. The network that we're flying as of today, there's always opportunities. Now having new planes coming our way might probably impact the network in Latin America, but We are serving 18 different airports, 16 countries. The only 2 countries where we are serving 2 cities is Brazil with Rio and São Paulo and Ecuador with Quito and Guayaquil. So our focus is to really become the leader in market share, the leader in operation, and the leader in terms of value recognition for the customers. And that's what we've been focusing. With that said, We are growing capacity. And out of these 18 different airports, we are having 3 flights a day in Mexico, Mexico City to Madrid, Bogotá, Madrid. Argentina is starting in the month of October, 3 flights a day. And we are expanding the capacity in the majority of our airports. We are growing Santiago. We are growing Lima. We are growing São Paulo as well. So they— it's, it's not about new destination, but to become the very, a very strong player on the destinations we're serving.

Lori Ranson:And, um, I just want to turn to passengers for a second because there's been a big push into premium since the pandemic. There's been large demand and that seems to be sticking around. It's just not a fleeting trend. Do you see that as a permanent fixture in terms of that appetite for a more premium experience?

Marina Colunga:Definitely. It's interesting because, well, at the very early days of the pandemic, we launched our A350neo with the premium economy cabin, which in our eyes were a perfect solution for Latin America. Ever since the pandemic hit, the, the strategy switched. But now, a couple of years back, we have this— we have identified specifically in the long haul a continued appetite and an opportunity to continue growing premiumness. We are working on positioning the premium economy, which is a cabin that it is a middle one. It is— we are continuing to improve in our business product with the A350, with private suites. They have a door, we have upgraded amenities, but then focusing a lot on this premium economy option because Latin Americans are aiming to travel to Europe in a, in a best possible way or the possible to the maximum of their capacity. So it's a perfect solution for those who cannot get to business but, but wants an elevated experience and continue to prove that it's working very deeply diligently. With that said, it's— we are also adding additional amenities to our economy cabin because we want to feel that— we want to reach the level of when anybody walks into a plane of Iberia, they all already feel premium in terms of the travel experience. Our, our economy cabins have a little bit wider seats. Our entertainment displays are the same for the 3 cabins, probably in terms of size they are not, but in terms of quality of the images, it's good as well. And then we have redesigned our gourmet experience in the plane. So we have not only one hot meal across, depending on the routes and depending a little bit of the number of hours, but We have added an additional snack. We have added the opportunity to have an ice cream into that experience. We have added a brand new and renewed wine list on board. And we have been able to customize our journey or the customer journey to the level of very detailed experience in terms of our application. So you can select your meal, you can select your seat, you can select which is the fare family that will serve better to your interest. And customizing the experience has proven to be an alternative to this perception of premium. You will no longer get what everybody gets, but your personal experience catered by Iberia in each of the 3 cabins.

Lori Ranson:And maybe just touch on partnerships and how important they are to Iberia serving this region?

Marina Colunga:Well, depending on— and again, it's, it's— we've been focusing on building the bridge of the communication bridge between the airports we serve and the hub in Madrid to reach other destinations. But it's also fair to say that while we continue to develop our network in Europe, such as Qatar or such as our domestic airlines, Iberia Express, Vueling, Air Nostrum. We also have our own alliance on Latin America. Not all the countries have the number of partners that can provide the service, but we have in some of our routes joint business with LATAM. We have joint business in Mexico with Aeroméxico, with Volaris, and with Viva Aerobus. We have joint business with Avianca. We have joint business with TAG in Central America. So ideally, what we want to create is some sort of the same network connectivity that we can provide in Europe, where by the time that you get there from each of the airports we serve at a local level. Argentina is a little bit of a tricky one because they're going through some sort of reorganization in terms of domestic network. But for the rest, LATAM, Avianca, and the 3 Mexican companies are probably our top alliances.

Lori Ranson:It's interesting that you partner with all 3 airlines in Mexico.

Marina Colunga:It does. Well, Mexico is a very strong, big country, and very close to me because I live in Mexico. Depending on the area of Mexico that the customer is based, it's more willing— the willingness of booking one of the airlines is probably the reason behind we can serve with the 3 of them. Aeroméxico, of course, it's super well-positioned and have the premium offer in the majority, not all, but in the majority of their fleets. when, when it comes to business, but also Viva Aerobus and Volaris, which are low cost, can provide us the opportunity to cover 100% of the Mexican territory. So it's really depending on the desire or the willingness or the preference of the customer that wants to connect to Mexico City, and we are open to have them.

Lori Ranson:I don't know, I want to open up For questions, if we have any questions from the audience. I don't see—

Marina Colunga:oh.

Lori Ranson:How is the integration between Iberia and BA under the IAG Group affecting Latin America?

Marina Colunga:This is very interesting, and it's a little bit of housekeeping, but we in Latin America operate as the commercial executor of the British Airways strategy. British and Iberia are sister companies that belong to the IAG Group, but each of them has a different approach to what they want to achieve in terms of long-term vision. Iberia is super dedicated, super laser-focused on increasing their footprint in Latin America. BA has a very strong presence already, specifically in some of the areas of Latin America, BA is super strong in the Caribbean, is super strong in Mexico, and our work is to continue delivering the promises and to continue delivering opportunities to BA. But again, there's probably the biggest challenges we have as a company worldwide is the number of available planes we have. So we are not looking at expanding the network of BA now, but continue to consolidate those airports that are serving by, by BA as well as Iberia.

Lori Ranson:Great. Well, unfortunately, we are out of time, but thank you so much.

Marina Colunga:Thank you so much, and thank you for, for the CAPA organizers to having us. It's an honor for me, and I look forward to see you, all of you, in any plane for Iberia coming soon.

Lori Ranson:Yeah, thank you.

Marina Colunga:Thank you very much.

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