IAG CEO provides insight into the year ahead

Transcript

Willie WalshI think Michael clearly express a view, which is great. He has extreme views and I think it helps in the overall debate. I don't disagree with him on some issues, he's critical of the whole situation, but I'm much more optimistic that this is an issue that will be resolved in a sensible way between the UK and the EU, and the UK and other jurisdictions that the UK will need to negotiate new agreements with.

It's not impossible to do it in the time frame that we're looking at, because we have already got a lot of these bilateral agreements in place, so I'm comfortable that the whole situation will be resolved.

We're very impressed by Norwegian and we have expressed that view very openly. I like Bjorn, I think he's done a great job. We believe in long haul low cost, the reason we started Level was we could see a profitable business. Clearly, Norwegian has struggled what is a great customer proposition into a financial success. We believe we can, given our ability to control costs. So, for us it's about participating in a profitable segment of the market, and we can do it organically, and we're going to do it with Level, and we can do it inorganically. So we have options, and that's the reason we believe in consolidation. But for us, consolidation is around the right airline at the right time, and critically, at the right price.

I've been very open about this, I said we're going to review all of our options, and we're very calm, it's nothing something that we have to do today. I've publicly stated that I don't expect to have to say anything in relation to it in the weeks and months ahead, so we're not doing anything. And all of our options include the option of selling the small stake that we have in the airline. So, we've not made any decision as yet, but there's no discussion ongoing, and I'm not expecting to have any discussions with Norwegian. Certainly there's nothing in my diary that suggests I would and eed to do that, and we're very relaxed about this.

I'd say the chances of a third runway at Heathrow are better today than they were six months ago. I would still rate it at maybe 60:40, I think there are a number of challenges that need to be overcome. The critical issue for us is cost, I'm supportive of the expansion of Heathrow, I have been since I joined British Airways, and before in fact. But it has to be done at the right price, and the industry is not prepared to accept the ridiculous prices that Heathrow has proposed to expand the airport. There's nobody that I've met that supports expansion at any cost, we support expansion when it's done in an efficient, cost effective way, and in a way that won't translate into higher charges for passengers.

So, if the airport can do that, and we believe they should be able to do that, then we're ll for it. But there are other challenges a swell, on the environmental front, that will have to be addressed, but I'm more optimistic today than I would've been six months ago. It's absolutely critical, and it's fascinating as well. The hanger 51 has given us an insight into a lot of very bright people and bright ideas, and innovation that we think can be adapted to suit our industry and to help our business, and help our customers. So, it's been really exciting, we've made a small investment in a number of the businesses that we've seen. We're continuing to look for opportunities, and it's just great, when you see a bright idea and you go wow, we could adapt this and it could actually fit to address some of the challenges we have in our industry.

So, that's what it's been, it's been a shop window, and it's opened our eyes to a lot of very innovative thinking, and innovative ideas that we wouldn't have come across if It wasn't for the hanger 51 program.

All of the airlines in the group are doing extremely well, our first quarter results were very, very strong, with all of the airlines improving their financial performance. Air Lingus is by a distance the best performing in terms of margins and return on invested capital. Everybody focuses on British Airways, because the scale of it, and obviously it contributes in terms of its scale significant amount of the profits of the business, but they're all doing very well and we're optimistic. We think that global, macroeconomic environment remains good. Clearly, everybody's going to be challenged by the increase in the oil price, a little bit less for us because we have a reasonable hedging in place, a lot of airlines have no hedging.

So, it's going to be a more challenging 2018 than maybe people thought it would be, but we're still very optimistic about the outlook for 2018 and beyond. It's been fantastic actually, and it's surprised us. A number of the airports that we hadn't really thought of ourselves, and actually some of them won't really be suitable for the 321, but we have options with the 330's and as you know, we're looking at further wide body aircraft for Air Lingus as well. So we've had a very, very strong response, and it's been stronger than we had anticipated, and we think there's more opportunity there than we had identified.

And for us, what it's about is it's not just about the airports that would like to see us sit about, engaging with the business communities around these airports, because it's critical that we have not just support from the airport, but support from the businesses and communities around those airports. And that's been very, very encouraging.

Willie Walsh

Well it'd by 2019, so we have a target for new destinations. We will be making those announcements in the months to come. But this week Air Lingus starts flying Dublin to Seattle, all of the new destinations that we've launched are performing very, very well. Advanced sales on Seattle have been very impressive. So we see a lot of opportunity for further expansion. The 321 gives us options on the East Coast, and gives us options to increase frequency to a number of the destinations that we're already serving. So, this is going to be a game changer for Air Lingus, it's a perfect aircraft for an airline based in Ireland, with a very strong presence in the US.

We have ambition obviously to expand beyond the traditional Europe, North America market that Air Lingus has served. Air Lingus did fly to Dubai a number of years ago, there was strong customer demand for it. But it wasn't a financial success, and that was principally because a lot of the people weren't going to Dubai, they were going over Dubai to somewhere else. So having a relationship with a hub carrier there was important.

So, I think the increasing trade between Asia and Ireland will justify Air Lingus operating to some destinations in Asia, but the opportunity that exists today is in Europe and in North America.

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