International Airlines Group, the parent company of Aer Lingus, British Airways, Iberia, LEVEL and Vueling, held its annual Capital Markets Day today, Friday 8 November 2019.
The event followed a different format to previous years in that there were no individual airline presentations, so there’s not much news on that front.
The one significant piece of BA related news was the first published plan for the roll-out of its Club Suite at London Heathrow, which you can view here.
The roll-out of the new seat is crucial to improving Net Promoter Scores across for Club World. Whilst improvements to amenities and catering have delivered higher NPS scores in other cabins, the impact in long-haul premium cabins has been quite limited.
In terms of over-arching themes and trends for the day.
IAG Is Slowing Down Planned Growth
As last year’s Capital Markets Day, IAG said that it would grow its Available Seat Kilometres by 6% on a compound basis by 2023.
This will now be at a rate of 3.4%. In 2020, Aer Lingus, BA and Iberia will grow at a rate of 2-3%. However, there will be no growth at all for Vueling, where demand is softening in Barcelona.
IAG Is Moving To Greater Centralisation
Since its formation in 2011, the basic structure of IAG has been to centralise back-office functions, with day-to-day operations left to individual airlines.
A theme from last year was that IAG is placing more emphasis on looking at the relative positioning of its airlines against rivals in certain “demand spaces”. By its own admission, in certain market segments designed by IAG, there is scope to improve against competitors:
Many functions such as the design of aircraft cabins, in-flight service design and airline branding which have been hitherto left to individual airlines will come under central direction from IAG.
Other activities such as pricing, revenue management, sales and distribution, and loyalty will move entirely to IAG. This could, for example, result in IAG implementing a single booking engine across all of its airlines.
Group Loyalty – Avios
The Avios currency and the various frequent flyer programmes that adopt them are an extremely important part of IAG, both in terms of generating revenues in their own right and driving loyalty to IAG airlines.
IAG is also exploring implementing a single loyalty programme across all of its airlines, as hotel groups do. The big difference between IAG airlines and hotels is that separate hotel brands tend not to dominate specific geographic markets.
In the UK, the BA Executive Club has a very high profile and replacing it with a new IAG-wide name could result in significant brand dilution. (One way it might get around that is an interim partial rebrand of individual schemes based around a new name, before a wholesale transfer to one programme.)
Dynamism and greater personalisation is becoming a stronger theme (eg no e-mails offering redemptions you’re not interested in!), whilst maintaining some of the prominent fixed milestones that customers can easily identify (eg the tiers of the BA Executive Club).
IAG is also looking at more opportunities to redeem Avios. Options to reduce the amount of cash payable, such as short-haul redemptions with a £1 payment and part-pay with Avios which have proven very popular. This is even where, on a scientific basis, they are not the best value use of Avios. However, it does create an important perception that Avios are easy to redeem.
At some point all IAG frequent flyer programmes will move to a single platform with a single account balance as Aer Lingus and Vueling do at the moment. This will enable, for example, a member of the BA Executive Club to use their Avios when paying for food on Vueling.
IAG is also in active discussions to add new Avios partners, particularly in the financial services sector. As you can’t fail to notice when spending any time in London, a lot of new “fin tech” companies have to spend significant amounts of advertising to acquire new customers, and partnering with Avios is seen as a way of reducing the cost of customer acquisitions.
IAG’s Fleet Plans
Over the past few months, IAG airlines have announced orders for new aircraft, notably the Airbus A321 XLR for Aer Lingus and Iberia, the Boeing 737 MAX for BA at Gatwick and Vueling, and the Boeing 777-9 for BA.
Taking into account the above orders, IAG’s fleet plan is largely unchanged. BA still plans to retire the Boeing 747 by 2024 and there have been some very slight changes to the planned pace of retirement.
BA will also begin retiring some Boeing 777-200 aircraft. This will begin next year with three “odd ball” aircraft being retired. 8 Boeing 777-200 aircraft will be left in service by 2029.
IAG still plans to order the Boeing 737 MAX, citing the need for competition between Airbus and Boeing though has yet to convert its Letter Of Intent into a firm order.Continue reading “International Airlines Group 2019 Capital Markets Day”