Iberia’s new CEO, Luis Gallego, overhauls Iberia’s management

Iberia’s new CEO, Luis Gallego, announced a new leadership team for Iberia on Friday (Iberia Press Release in Spanish).

According to the release, the number of directors reporting to the Iberia CEO has been reduced to nine. Of the nine strong management team, four are external appointments and the remainder are internal promotions.

A new position of Network Development and Partnerships has been created. This will be important for Iberia. It doesn’t have any partners (to my knowledge) to provide it with feed to its long haul routes to Latin America from Asia and the Middle East. Furthermore, the prospective Oneworld alliance member, TAM, will be an important partner for Iberia’s Brazilian routes. And the number of routes served by Iberia to Brazil is some way short of its Portuguese neighbour TAP.

However, the news release is more interesting for what it doesn’t say. That Iberia’s CEO was replaced shortly after the arbitration process over its restructuring was concluded and that the new CEO has replaced the management team points to a strong dissatisfaction on the part of IAG over the running of Iberia. The heavy losses incurred at Iberia and the stark divergence in the performance between British Airways and Iberia not only question the credibility of IAG management but the whole rationale of the IAG structure and original merger between the two airlines.

During the briefing for analysts on Friday, Willie Walsh criticised Iberia for being too focused on seat factors and market share instead of revenue quality. That this issue is only being addressed some two years into the merger exposes IAG management to criticism they did not get a handle on Iberia’s commercial performance quickly enough.

IAG is promising a further investor update on Iberia next month and whilst significant progress has been made on reducing cost and capacity, IAG will need to instil confidence amongst investors that not only have the losses at Iberia been contained this year but there is the possibility of profitable returns beyond 2015.

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