Luis Gallego, CEO, IAG, tells Graham Newton, editor of IATA’s Magazine Airlines International, that there will always be a human element in customer satisfaction.
What are the pros and cons of being an airline group?
I do not think it’s about pros and cons, it’s different to that. I have been in aviation my whole life and when you are in a group like IAG, the situation is not the same as being a single airline.
We give each airline the freedom to manage their P&L, their network, and the customer proposition. The group’s role is to allocate capital. We decide where we want to invest and we have a model where we only do at group level the things that we think can improve the performance of the different airlines.
The model continues to deliver very strong results and that’s the reason we continue with it.
Do you see more consolidation happening within the industry?
More consolidation is definitely needed. It is good to have big airlines that can compete in a global market, and it is also good for the end customer. When you have size, you can invest in service, in technology, and many other aspects. So, I think that consolidation benefits the industry and its customers, and I hope it will happen.
Regarding the net-zero carbon emissions by 2050 goal, are you happy with the progress being made?
To be honest, I’m not happy with the progress on net-zero. IATA’s position is clear; net-zero carbon emissions by 2050 is achievable, but it will require an acceleration of all the programs currently being considered. It’s important that we have a global policy framework that will facilitate the solutions that aviation needs.
Mandates alone will not incentivise a flourishing sustainable aviation fuels (SAF) market, while in Europe Emissions Trading Scheme (ETS) costs continue to disproportionately burden European airlines. In these circumstances, the eSAF sub-mandate must be postponed until eSAF is sufficiently available and affordable, and the regulatory framework must be redesigned to support diverse, affordable production pathways.
Airlines have voluntary net-zero commitments and are already investing heavily in decarbonization, including billions annually on ETS costs on intra-EU routes, SAF and eSAF offtake agreements, equity stakes, and partnerships.
To deliver on our net-zero goals it is important that we have the policy framework globally to help shape the solutions the aviation industry has to offer.
What would improve collaboration with industry partners, such as infrastructure providers?
Aviation is an ecosystem and we cannot improve things if we don’t work together. The industry talks about air traffic management modernization, supply chain issues, and how we can improve the cost, but the point is a single stakeholder cannot do this alone. We need to work together from the outset, have common data, and the same ambition to try to improve operational performance and to gain control of costs.
How difficult has it become to operate at Heathrow?
Heathrow is a constrained airport and it’s a challenge to operate there. But the main issues are related also to cost efficiency. Heathrow is the most expensive airport in the world, and Heathrow Airport Limited must understand that the airport is competing with other European hubs.
The UK needs an efficient, affordable hub airport that allows UK based airlines to compete with those at hubs abroad. It is essential to the UK’s connectivity and economic prosperity.
We now have an opportunity with the possible expansion of Heathrow. The UK Government and the UK Civil Aviation Authority have the power to ensure Heathrow grows responsibly. But the regulatory model that we have right now needs to be reformed so that expansion only goes ahead within a reasonable budget.
What European issues are hurting aviation—and European competitiveness—the most?
Airport charges across Europe have been increasing at an unsustainable pace. Between 2009 and 2016, average charges increased 25%, and at major airports the increase reached 80%–100%.
Despite these increases, airport capacity across Europe remained flat during that period with passengers and airlines paying despite infrastructure performance not improving proportionately. The Airport Charges Directive must be reformed so that independent regulators have stronger powers to assess airport investment plans and approve charges accordingly.
Europe also needs a revision of the passenger rights regulation, EU261. The current three-hour compensation threshold is not aligned with operational needs and makes it harder to recover operations quickly and does not lead to fewer cancellations. We support extending the delay window, which would result in 40% fewer long delays.
What more can the industry do to ensure governments understand the value of aviation?
IATA is doing a good job working with the governments, explaining how aviation contributes to GDP, to jobs, and to connectivity. The various shocks aviation has faced in the past few years have demonstrated the valuable role IATA plays. IATA is also advocating in its areas of priority, such as changes in the regulation, including a harmonized consumer rule. We need to ensure policy makers take the right decisions for a thriving aviation industry that benefits all…
