Sunday Times Interview With IAG CEO Luis Gallego

IAG CEO Luis Gallego speaks to The Sunday Times on BA’s future at Gatwick and the possibility of buying easyJet.

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

It has been just over a year since Luis Gallego replaced Willie Walsh as CEO of International Airlines Group, the parent company of Aer Lingus, BA, Iberia, LEVEL and Vueling.

Luis has a relatively low media profile in the UK compared to Willie Walsh. This is in part due to the fact that he came to the role via Iberia, rather than BA. If you are CEO of BA you will inevitably end up on the front pages of newspapers and leading TV news bulletins.

Luis was a protégé of Willie and was regularly praised by him for establishing Iberia Express with its industry leading punctuality and for overhauling Iberia. That said, he does have a very different management style. Unlike Willie, he also likes to keep his views on rival airlines to himself.

This week’s edition of The Sunday Times features an interview with Luis. Inevitably, much of it focuses on COVID-19 and ongoing frustration with international travel restrictions in the UK which means BA is recovering more slowly than other IAG airlines, notably Iberia and Vueling.

As always with interviews with CEOs of public companies, there are limitations on what can be said as any share price sensitive announcements have to be made to the stock exchange first.

That said, there some interesting points and comments which leave you trying to read between the lines:

BA Short Haul At Gatwick

IAG has always been an organisation that has prided itself on “transformational change” and was never going to let an industry crisis go to waste.

Attention in recent months has been focused on BA at Gatwick with a planned restructuring to introduce a more flexible cost base better suited to summer seasonal short haul operations.

On BA at Gatwick, Luis says:

“The thing is, in Gatwick for the last ten years, except 2016, we were losing money. And now we are going to have an even tougher environment, so we need to have an efficient vehicle there. What we want is to provide the same standard [of service] and the same BA experience but on a more efficient platform.”

It is claimed in the interview that Willie Walsh wanted to close down BA short haul at Gatwick. Luis was prepared to entertain proposals from BA to keep the brand at Gatwick, with flights operated by a new subsidiary company.

Whilst it won’t be known for some time whether talks with unions have been ultimately successful, some union sources note a more conciliatory tone than Willie Walsh:

“Gallego is an engineer, and wants to diagnose the problem and think through the solution. He can be very tough, but he likes to follow a process. With Walsh, it was toxic — you were either in the court of Willie Walsh, and could get a hearing, or you weren’t.”

Luis does not indicate what may happen if talks with unions fail, which would require IAG to either sell its slots, or hand them to other IAG airlines which have a significantly lower brand profile than BA in the South East.

IAG Buying easyJet

There has been speculation on the future of easyJet recently given it was disclosed that Wizz Air had made an unsuccessful bid for the airline.

Oddly, Luis does not deny outright the possibility of IAG buying easyJet. It is described as one of several airlines “on the radar”.

When pressed whether IAG has held merger talks with easyJet management, there is a rather curious non-denial denial “We talk to all airlines that can be interesting to us.”

Whilst IAG buying easyJet would be the sort of “transformational” deal the group seeks, it is hard to see competition regulators allowing it without significant slot divestures given the number of overlapping city pairs.

A Second Rights Issue

Following easyJet’s announcement it is to undertake a rights issue, there has been speculation that IAG will follow suit with a second rights issue to raise funds from shareholders.

This is firmly denied by Luis Gallego. Do bear in mind, that Willie Walsh gave an interview to The Sunday Times in June last year in which a rights issue was denied, only for IAG to announce a rights issue three months later.

The Departure Of Alex Cruz

When of Luis’s first moves was to replace BA CEO Alex Cruz, whose move from Vueling to BA was seen as stepping stone to IAG, with Sean Doyle from Aer Lingus.

British Airways CEO Alex Cruz Media Appearances Friday 7 September 2018
British Airways CEO Alex Cruz Media Appearances Friday 7 September 2018 (Image Credit: BBC, CNN, ITV News)

Alex Cruz had many volatile times at BA, notably a series of IT failures, a pilot strike marring its centenary celebrations and criticism for his handling negotiations with unions on a restructuring post COVID-19.

That all said, he did attract praise for finally letting go of the “yin yang” layout in Club World, refurbishing lounges, and investing in catering and soft amenities in premium cabins.

Of Alex, Luis says:

“I have known Alex since 2006. I like Alex. I think he did a very good job in BA. He closed the [staff] agreements we have now. But I thought we needed a new phase.”

“He told me also he was tired of all this . . . fighting with the Covid, having strikes, taking tough decisions . . . you’re tired. And so we thought it was good to start planning a new cycle.”

The next major update from IAG should come when it announces its third quarter results on Friday 5 November 2021.

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