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Aviation Industry

Iberia moves from survival to growth mode; eyes Latin America

08/11/2018

International Airlines Group’s (IAG) Iberia is moving out of survival mode and looking to Latin America as a key pillar of theSpanish flag carrier’s future strategy.

“In 2012, we were talking about losing jobs, about survival. Now we are not talking about that; we’re talking about development,” Iberia chairman and CEO Luis Gallego said during IAG’s capital markets day Nov. 2.

Over the past five years, Iberia has restructured the company’s business under the Plan de Futuro initiative, which has improved revenues, cut costs and optimized the airline’s processes, fleet and network.

Since 2012, these measures have led to a €728 million ($830.8 million) EBIT improvement, shifting from a €351 million loss to a €377 million profit—a result Gallego described as “outstanding.” Punctuality has also improved from 74% to 90%.

Over the initial years of the plan, Iberia delivered a 4% annual reduction in non-fuel unit costs, but between 2018 and 2023 this savings target will narrow to 1%.

In this second phase, the cost-saving focus will shift from labor agreements to supplier contracts, Gallego said. Previously, employee costs were 51% of targeted costs savings, but this has now slimmed to 15%. Other cost savings and productivity gains will come from new technologies and business-process simplification.

Latin America will continue to be an important market for Iberia’s development. Iberia still has “work to do” in the region in terms of planned investments, capacity growth, product development and partnerships, Gallego said.

“For us, we are sure that [our partnership with LATAM] is going to be key,” he said.

Since 2008, Iberia’s overall capacity is down 1%, but the airline will enter an expansion phase, with 6% growth planned by 2023.

“Now we have done our homework, we can expand our network and be in a good position to compete,” Gallego said.

Around 32% of the anticipated 2018-23 growth will be on short-haul, while the remaining 68% will be on long-haul, but Gallego said this remains subject to “successful labor agreements”…

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