“Vueling is a great airline and will be a welcome addition to IAG, where it will benefit from the group's financial strength,” Walsh says.
But Vueling is not intended to become the solution for Iberia's problems; it will continue to follow its own intra-European point-to-point model. “Europe is a big market and there are different horse races. The beauty of IAG is that we have created a group that allows us to do that—multibrand, multinational. We can have several different brands in the group and you can operate in several different markets,” Walsh says.
IAG is not looking to acquire other carriers for now. “We don't see anything that would represent additional value to us. Therefore, it is unlikely we would do anything in the short term,” Walsh says.
That is also because the approach to consolidation is changing. “Unlike previous consolidation strategies, where it was all about getting bigger, we are very clear that this is about the right partners to make you stronger rather than bigger,” he notes. “Size has some relevance, but as we have seen before, it does not necessarily guarantee success.” And IAG serves as a good example, inadvertently.
The acquisition of BMI gave BA access to high-value Heathrow slots, and if another similar opportunity arises, Walsh says he would consider it. “An airline that had additional slots at Heathrow may represent additional value to us. But there are not many airlines left, to be honest with you.”
One of the most important tasks IAG performs on behalf of its subsidiaries is fleet acquisition. And there is a lot to do: In the medium to long term, almost 100 widebodies need to be replaced at British Airways and more than 30 at Iberia. The process has started, but crucial decisions still lie ahead.
Last week, IAG took the process a step further, signing a memorandum of understanding for 18 Airbus A350-1000s and 18 options. All of the aircraft are earmarked for BA. IAG also agreed with Airbus on commercial terms and production slots for an additional batch of aircraft to be allocated to Iberia. But that part of the deal is dependent on the Spanish carrier reducing its cost base beforehand. IAG did not reveal how many more aircraft would be required. However, the airline is flying 15 A340-300s and 17 A340-600s that are no longer economical to operate.
BA has only once before ordered Airbus widebodies. The carrier is taking delivery of its first of 12 A380s this year, almost at the same time as the first Boeing 787 arrives. The airline operates 112 A320-family aircraft and has no outstanding narrowbody orders. In the medium term, BA must begin replacing its aging Boeing 737 fleet, but that decision will likely come only after the widebody replacement is done.
The A350-1000 plus 18 787 options that IAG plans to convert for BA into firm orders will serve to replace the Boeing 747-400 fleet. The order does not mean the proposed Boeing 777X is being ruled out.