A wrap up of IAG’s Capital Markets Day 2018

Here are the major themes and announcements from IAG’s annual Capital Markets Day.

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International Airlines Group Airlines & Businesses
International Airlines Group Airlines & Businesses

International Airlines Group held its annual Capital Markets Day today, Friday 2 November 2018.

If you are so inclined, you can download the whole presentation of no less than 174 slides from the IAG website.

IAG prides itself of the consistency of its strategy, so there are no major surprises. The general theme is of IAG airlines consolidating their positions at their respective hubs, investing in profitable growth, and operational efficiencies.

However, there were some differences from previous years:

IAG is pursuing stronger airline brand differentiation

IAG has always distinguished itself as being a group with a portfolio of distinct brands, with operational independence.

Its brands to date have largely been defined by the geographic location of their respective hubs.

There seems to be more emphasis on brand differentiation and relative strength. This does not mean IAG will be changing its very disciplined approach to cost and investment. But there is a clear acknowledgement that in the current market, its brands can’t be everything to everyone.

BA and Iberia are the designated premium brands. Aer Lingus and Iberia Express are deemed “value carriers”. And Vueling and LEVEL are the low cost airlines.

It is noteworthy for an internal research exercise where IAG has identified 7 different market segments, there are some sections of the market where easyJet and Norwegian are positioned above BA in terms of perception. For example, BA is positioned below easyJet in the short-haul “Smooth Flying” segment and below Norwegian in the “Business on a Budget” segment.

International Airlines Group Capital Markets Day
International Airlines Group Capital Markets Day (Image Credit: International Airlines Group)
International Airlines Group Capital Markets Day 2018
International Airlines Group Capital Markets Day (Image Credit: International Airlines Group)

In previous Capital Markets Days IAG has referred to knowing where it “stretch the [BA] brand” and where “the breaking points are”. It seems clear these have been tested in recent years.

With 1-2 cabins, it is far easier for easyJet and Norwegian to position themselves. For an airline with the network and number of cabins it has, BA needs broad appeal across price sensitive and premium business and leisure passengers. However, it seems clear that BA, and Iberia, will pursue sharper premium positioning in the market,

IAG is increasing its growth plans

Subject to market conditions, there are ambitions to grow IAG’s fleet from 386 short-haul aircraft this year to 467 in 2023. Long-haul aircraft are expected to increase from 201 this year to 249 in 2023.

International Airlines Group Capital Markets Day
International Airlines Group Capital Markets Day (Image Credit: International Airlines Group)
International Airlines Group Capital Markets Day
International Airlines Group Capital Markets Day (Image Credit: International Airlines Group)

Taking into account existing aircraft orders and planned retirements, IAG will need to exercise options or place new orders for 128 short-haul aircraft and 44 long-haul aircraft for delivery by 2023.

For BA alone, it plans to retire 36 Boeing 747s by 2024, and future deliveries of 16 Airbus A350-1000 and 12 Boeing 787-10 aircraft are not enough to replace these.

Given IAG plans to add increase long-haul aircraft by 16 in 2020 and 13 in 2021, we could be very many new routes announced by IAG airlines in the next 12 months.

In terms of major developments by airline:

Aer Lingus

As is expected, Aer Lingus is focused on growing its North American route network from Dublin, principally with the aid of the Airbus A321 Long Range aircraft.

The first 3 of 14 aircraft will be delivered in 2019.

Aer Lingus confirmed that it will introduce a new brand identity and staff uniforms. It will also reintroduce a form of short-haul business class “Aer Space” on some routes. This was planned before it was acquired by IAG, but had been put on the back burner.

Whilst Aer Lingus referred to successful partnerships with Alaska Airlines and JetBlue there is no sign of it imminently joining the transatlantic joint-venture with American Airlines or BA. It is still awaiting regulatory approval. There is also no date on it rejoining Oneworld. Given its relative strength in the US local market, it seems keen to preserve its relative independence and “value carrier” status.

One idea that may be trialled on Aer Lingus is an “on-demand” restaurant style dining where customers can pre-order food items on their personal devices.

British Airways

There were a number of BA announcements, all detailed here.

The overarching theme is getting BA ready for its centenary celebrations in 2019 and ensuring its putting its best foot forward.

Before BA officially markets its centenary in August 2019, it will have unveiled its new Club World cabin and Airbus A350-1000 aircraft and introduced new catering and amenities in World Traveller Plus and First Class. There are also, as yet undefined, catering improvements planned for EuroTraveller and BA lounges.

Iberia

Iberia seems largely focused on consolidating its position in Latin America and its core markets such as Argentina, Brazil, and Chile.

There’s been no mention of further growth to Asia or exploring new opportunities in Africa.

LEVEL

LEVEL will remain a “virtual” airline using assets of other airlines in the group, such as Iberia for Barcelona.

Whilst LEVEL does have ambitions to grow substantially over the next five years, it has not announced any new bases yet for 2019. Based on comments made by Willie Walsh last month, Paris Orly seems to not have started off as quickly as Barcelona. As a new CEO has started only very recently at LEVEL, it seems to be consolidating its existing routes before announcing any more.

Vueling

Vueling is largely focused on consolidating its operation in Barcelona after a difficult summer due to Air Traffic Control disruption in Europe due to strikes in Marseille which have been a deep source of frustration to IAG.

It has recently introduced new fare types and removed its “Excellence” business class.

Avios

The one glaring omission is that there was very little mention of Avios at all.

It is known that initiatives have been underway to introduce a single Avios bank balance across IAG frequent flyer programmes and dynamic pricing of Avios rewards, but all mentions of Avios were conspicuously absent. As Avios is part of a dedicated business unit in IAG this is quite unexpected.

International Airlines Group 3rd Quarter Results

International Airlines Group has released its financial results for the 3rd quarter of 2018 and provided a strategic update on the group.

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International Airlines Group Airlines & Businesses
International Airlines Group Airlines & Businesses

International Airlines Group released its 3rd quarter results on Friday 26 October 2018.

There are no great surprises in the numbers themselves. It reported a modest increase in operating profit year-on-year to €1,460 million as rising revenues offset rising fuel costs, which has affected all airlines.

As usual, the results announcement is more interesting for comments from the group during analyst question and answer sessions:

BA Cyber Attack

IAG was limited in what it could say about the cyber attack on BA in light of the fact that a criminal investigation is underway.

Before the results announcement, IAG and BA confirmed that in addition to its first announcement in September, it had also identified that the attacker had viewed personal financial data of passengers making Avios redemptions between Saturday 21 April 2018 and Saturday 28 July 2018.

Two cyber security firms have carried out a forensic investigation on the cyber attack. IAG has also been working with the National Cyber Security Centre, which is part of GCHQ, and the National Crime Agency. The identity of the individual or organisation that carried out the cyber attack is not known.

However, IAG knows that it was a single attacker doing different things over a period of time. IAG considers that it understands exactly how the attacker secured access to BA’s systems, what the attacker did, and when, and what data was viewed.

Whilst there is evidence that customer data was viewed, there is no evidence to indicate that customer data was actually extracted from BA’s systems. It appears that it was not the billing and payment systems that were specifically compromised.

Although IAG will remain limited in what it can say for some time, it does seem prepared to eventually give a full account so that others can learn from it.

Rolls-Royce Engine Dreamliner Issues

IAG CEO Willie Walsh reiterated his unhappiness at ongoing issues with Rolls Royce engines on its fleet of Boeing 787 Dreamliner aircraft.

This has continued to affected BA as aircraft are grounded. It has had to selectively cancel flights – with Doha bearing the brunt of cancellations – and wet lease aircraft from Air Belgium to cover flights to Abu Dhabi and Dubai.

These issues will continue into 2019, when it had been expected to be resolved by the end of the summer. IAG is receiving cash and non-monetary compensation from Rolls-Royce, which has not been disclosed for reasons of commercial confidentiality.

Deliveries of Airbus A321 Long Range aircraft to Aer Lingus next year may be also delayed, which may have an impact on its expansion plans for next year.
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International Airlines Group 2018 Half-Year Results

IAG has released its financial results for the first half of 2018.

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International Airlines Group - Aer Lingus, BA, Iberia, Vueling
International Airlines Group

International Airlines Group, the parent company of Aer Lingus, BA, Iberia, LEVEL and Vueling, has yesterday, Friday 3 August 2018, released its half-year results for 2018.

The numbers contain few surprises. IAG reported an operating profit of €1,115m, compared to €950m for the previous year.

Air France-KLM reported a first half operating profit of €228m compared to €553m for the previous year. Lufthansa Group reported an operating profit of €967m compared to €987m for the previous year.

There are familiar themes for airlines in Europe, namely increased fuel prices and intense irritation at disruption caused by Air Traffic Control delays.

Such is the importance of expectations, IAG’s share price actually fell after its results were announced, whereas Air France-KLM’s increased as revenue held up in spite of prolonged industrial action at Air France.

IAG also provided an update in its presentation to analysts on a number of current issues. Arguably, it is more interesting for what wasn’t said, rather than what was said:

IAG & Norwegian

There is no progress at all to report on IAG’s bid for Norwegian.

IAG CEO Willie Walsh indicated that IAG would sell its shareholding in Norwegian as it has no intention in being a long-term minority investor.

That said, I would not infer that this means IAG is going to give up on Norwegian easily. Whilst Willie Walsh has said he would not countenance a hostile take-over bid, I expect IAG will sit this one out for a while.
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International Airlines Group Q1 2018 Results

IAG has released its financial results for Q1 2018 and provided an update on the status of talks with Norwegian and Boeing 787 issues at BA.

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International Airlines Group - Aer Lingus, BA, Iberia, Vueling
International Airlines Group

International Airlines Group, the parent company of Aer Lingus, BA, Iberia, LEVEL and Vueling, has today, Friday 4 May 2018, released its first quarter results for 2018.

The figures themselves contain few surprises. IAG reported an increase in operating profit to €280m, and increase of €120m from €160m in the previous year.

There was less positive news at Air France KLM. Strikes at Air France have resulted in a widening of its first quarter operating loss from €33m to €118m.

IAG also provided an update in its presentation to analysts on a number of current issues:

Norwegian Rejects Two Conditional IAG Bids

IAG confirmed it has been in discussions with Norwegian and has issued the following statement:

On 12 April 2018, IAG announced that it had acquired a 4.61 per cent ownership position (minority investment) in Norwegian Air Shuttle ASA (Norwegian). The minority investment was intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian. IAG confirms that it has had contact with the Norwegian Board regarding a possible offer, without reaching an agreement. IAG is currently considering its options in relation to Norwegian.

Continue reading “International Airlines Group Q1 2018 Results”

Why does International Airlines Group want to buy Norwegian?

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IAG & Norwegian
IAG & Norwegian

As has been widely reported today, Thursday 12 April 2018, International Airlines Group (“IAG”) has acquired a 4.61% stake in Norwegian Air Shuttle ASA (“Norwegian”).

This was first reported by Bloomberg. IAG confirmed in a statement to the Stock Exchange that this was done to initiate discussions with Norwegian with a view to making a full offer for the airline. Norwegian was not aware of IAG’s activity and no discussions have taken place to date.

According to the Financial Times, Norwegian’s co-founders Bjørn Kjos and Bjørn H. Kise own a joint 27% stake in the airline. It is axiomatic that no takeover bid could go ahead without their consent.
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International Airlines Group to acquire NIKI

International Airlines Group, the parent company of BA, is to acquire certain assets of the Austrian airline NIKI. It will operate as a subsidiary of Barcelona based airline Vueling and will operate from Vienna, Dusseldorf, Munich, Palma and Zurich.

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International Airlines Group - Aer Lingus, BA, Iberia, Vueling
International Airlines Group – Aer Lingus, BA, Iberia, Vueling

International Airlines Group (“IAG”) is to acquire the assets of Austrian airline NIKI.

The airline was formerly part of the Air Berlin group and was due to be acquired by Lufthansa, amongst other assets of Air Berlin. However, Lufthansa withdrew its bid after the European Commission raised competition concerns. NIKI subsequently suspended all of its operations, and they currently remain suspended.
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International Airlines Group holds its Capital Markets Day

International Airlines Group, the parent company of Aer Lingus, British Airways, Iberia and Vueling, is holding its annual Capital Markets Day today, Friday 3 November 2017.

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International Airlines Group - Aer Lingus, BA, Iberia, Vueling
International Airlines Group – Aer Lingus, BA, Iberia, Vueling
International Airlines Group, the parent company of Aer Lingus, British Airways, Iberia and Vueling, is holding its annual Capital Markets Day today, Friday 3 November 2017.

Whilst the event is very much aimed at insitutional investors and City analysts with industrial quantities of Powerpoint slides in all colours of the spectrum and talk of Return On Invested Capital and Earnings Per Share, there should be plenty of news for passengers.

At last year’s event there were a number of BA announcements including a £400m investment in Club World and reconfiguration of selected Boeing 777s.

The slide deck should be available from around 08:00 GMT on the IAG website. Note that the PDF slide deck may not load if you are using Safari as your browser.

Whilst the themes should be very much as last year, namely targeted investment, operational efficiency and increased use of digital technology and automation, we should at least expect some new announcements.

For BA, we hope to hear at least some detail on its plans for a Club World cabin, premium ground services at London Heathrow and digital technology.

We will update throughout the day on any noteworthy announcements, both on this site and on Twitter.

Update: Here are details of BA related announcements from the day.

IAG to launch new low cost long-haul airline “Level”

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After months of speculation, International Airlines Group (“IAG”) which is the parent company of Aer Lingus, British Airways, Iberia and Vueling, has today confirmed is to launch a new low cost long-haul airline.

The airline is called “Level”.  This is the first new airline launched by IAG in its six year history.

The airline will initially be based in Barcelona.  It will launch on 1 June 2017 and its inaugural route will be Barcelona – Los Angeles which operate twice weekly.

Routes from Barcelona to Oakland California (three times weekly) will follow on 2 June 2017.  Barcelona – Punta Cana (twice weeky) on 10 June 2017.  Barcelona – Buenos Aires on 17 June 2017 (three times weekly).

The airline will intially operate with two brand new Airbus A330-200 aircraft with 239 seats in economy in a 2-4-2 configuration and 21 seats across three rows in premium economy in a 2-3-2 configuration.

In economy a seat pitch of 30″ will be offered with a 9″ personal entertainment screen.  Checked baggage, extra leg room seats and hot meals can be purchased in advance.  Food and drink, duty free goods, in flight comfort amenities such as blankets and pillows can be purchased on board.

In premium economy, a seat pitch of 37″ will be offered with a 12″ personal entertainment screen and noise-cancelling headphones.

Checked luggage (in addition to a free cabin bag), hot meals drinks and snacks, priority boarding, and in flight entertainment will be complimentary for customers flying in premium economy.

High speed internet connectivity will also be available for a charge for all passengers.

The availability of refunds and flight changes and seat selection will depend on the type of fare purchase in both cabins.

IAG promises one way fares economy from €99 and one way premium economy fares from €599.

Direct flights are on sale now at Flylevel.com

Connections will be available from Vueling’s short-haul network at Barcelona which, of course, operates from London Gatwick and Heathrow and a number of UK regional airports.  However, flights with connections need to be booked via Iberia.com

Members of the Aer Lingus, British Airways and Iberia frequent flyer programmes will be able to earn Avios on all flights operated by Level.

The launch of Level is a clear competitive response by IAG to Norwegian which is launching new routes from a number of IAG markets in Europe.  We have already seen a number of moves such as the launch by BA of routes from Gatwick to New York JFK, Fort Lauderdale and Oakland.  BA is also planning to “densify” (that’s add more seats) some of its Boeing 777s to compete against Norwegian. We are likely to see further moves such as the launch of “unbundled” long-haul economy fares by Aer Lingus and BA.

As IAG have adopted a trans-national brand name, the airline will no doubt explore more routes from other European cities where connections from Vueling are available, such as Rome and Paris.  Looking at the branding and marketing materials, IAG is actively pitching this airline at a younger market than many of its existing airlines.  It will of course be interesting to see how this develops and whether it launches any routes from the UK.

IAG selects four start-ups to join its “Hanger 51” innovation accelerator

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International Airlines Group - Aer Lingus, BA, Iberia, Vueling
International Airlines Group – Aer Lingus, BA, Iberia, Vueling

International Airlines Group (“IAG”), the parent company of British Airways, Aer Lingus, Iberia and Vueling, has announced the names of four tech start-ups that will work with the group to develop new technology solutions for airlines and passengers.

This is all part of IAG’s tech accelerator Hangar 51 which it has developed with L Marks.

IAG received some 450 applications. 26 applicants were invited to attend a pitch day (video above) and the following four tech start-ups were selected:
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The European Commission approves IAG’s takeover of Aer Lingus

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Aer Lingus London Heathrow
Aer Lingus London Heathrow (Image Credit: Heathrow)

International Airlines Group’s takeover of Aer Lingus moved another step closer today, 14 July 2015, after the European Commission gave formal approval of the deal.

It is subject to some conditions, known as “commitments” in order to assuage competition concerns of the European Commission.

These are:

1. IAG must forfeit up to five slot pairs at London Gatwick airport for use on routes between London and Dublin and London and Belfast.  One slot pair must be used for London – Belfast, two slot pairs must be used for London – Dublin and the remaining two can be used for either route.

2. IAG must offer rival airlines special prorate deals for passengers connecting from Aer Lingus short-haul flights to long-haul flights operated by rival airlines at London Heathrow, London Gatwick, Manchester, Amsterdam, Shannon and Dublin airports.  This is so rival airlines such as KLM and Virgin Atlantic can still offer passengers connections from Aer Lingus short-haul flights.
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