London Air Travel’s Monday Briefing – 13 January 2020

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Luis Gallego, Chief Executive Designate, International Airlines Group
Luis Gallego, Chief Executive Designate, International Airlines Group (Image Credit: Iberia)

Hello and welcome to the first Monday Briefing from London Air Travel for 2020.

Two weeks into the year, we’ve had a reminder that airlines are never far away from geopolitical events. A number of airlines are still financially vulnerable – late on Sunday evening Sky News reported that Flybe is in talks to secure additional financing. This year will also see a significant upheaval in the management of IAG.

IAG Prepares For Life After Willie Walsh

It has been known for some months that Willie Walsh was due to retire from IAG before October 2021.

IAG has since moved very quickly – there has been speculation in the Sunday papers as to why – to replace Willie Walsh as CEO. Last week, IAG announced that Luis Gallego will be CEO of the group from Thursday 26 March 2020.

Luis is currently CEO and Chairman of Iberia as well as Chairman of its low cost long-haul brand LEVEL. Luis has also previously been CEO of Iberia Express – long seen by Willie Walsh as a model of operational excellence.

There is no question that Luis will have a very different management style to Willie Walsh.

I’ll quote Oscar Wilde that whenever people agree with me, I always think I’m wrong, but the fact that they’re disagreeing with me means I’m right.

Willie Walsh, 2018

Memories about BA are often very short and very selective. It’s worth recalling that many commentators were convinced that a merger of BA and Iberia could not work. Ironically, one concern was that IAG would not be able to exert control over the two airlines, which has proved to be far from the case.

IAG can justifiably claim to have pursued cost & revenue synergies with considerably more vigour than Air France-KLM and Lufthansa and introduced genuinely new ideas.

There have certainly been some mis-steps. It wasn’t until that long ago that Willie Walsh was convinced that BA did not need to change its “yin-yang” layout in Club World. In reality, BA would have saved itself a lot of grief it had introduced an entirely long-haul business class new seat with the Airbus A380 and Boeing 787 in 2013. BA’s high profile IT failures point to a lack of investment which has since has been addressed with a higher profile for IAG’s Chief Information Officer.

It is also only until very recently that IAG appears to have taken a look at the relative positioning of its brands in the market. Talk of “stretching” the BA brand a few years ago has since been reversed.

Willie Walsh’s departure does seem premature. Having long been an advocate of “rational” behaviour and disciplined investment, he has almost relished the opportunity to prove IAG’s financial resilience during an industry crisis. That will now fall to Luis.

Luis Gallego will have no shortage of items on his to do list. The acquisition of Air Europa will inevitably be challenged by regulatory authorities. IAG will also need to decide how to rationalise its brands in Spain, which will number five. There is also the question of LEVEL, where its ambitious growth plans appear to have been put in hold.

There is also the question of how IAG’s structure will be compatible with the terms of an eventual UK-EU trade deal with many investors and journalists left unconvinced by IAG’s apparent lack of concern to date.

From a UK perspective, when relative weakness is that having not run BA, Luis Gallego is not known amongst UK Government ministers. IAG will have to lobby the UK Government on a number of matters, including the third runway at Heathrow and possibly the Competition & Markets Authority’s findings on its review of the transatlantic joint business with American Airlines.

A new CEO will undoubtedly lead to other management changes in a group that does like to move executives around and there has inevitably been speculation about Alex Cruz at BA.

Other News In Brief

Sky News has reported on Sunday evening that Flybe, which was acquired by the Connect Airways consortium last year, is engaged in urgent talks to secure additional financing to prevent its collapse. (Sky News)

Heathrow Airport has advised it will not submit its final planning application for a third runway until late 2020. There will be a period of consultation following the Civil Aviation Authority’s decision to cap early spending on the runway. This means that, should final consent be granted, the runway would not become operational until 2028-2029.

Crossrail has provided an update on the progress of its delayed opening. Services on the central section between Paddington and Abbey Wood will begin in summer 2021. Services from Reading and Heathrow and Abbey Wood and Shenfield should commence by mid-2022.

Ernest Airlines has suspended operations. (Ernest Airlines)

In case you missed it:

What to expect from British Airways in 2020. (London Air Travel)

What to expect from Virgin Atlantic in 2020. (London Air Travel)

What to expect from airlines & airports in 2020. (London Air Travel)

The airlines we lost from 2010-2019. (Part 1) (Part 2)

Reflections on a decade of air travel. (London Air Travel)

How will be flying in 2030? (London Air Travel)

British Airways’ Fleet Renewal and Refurbishment Plans (London Air Travel)

British Airways’ Airbus A380 Flights in 2020. (London Air Travel)

Late post publication updates:

[Reserved for updates throughout the day]

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