October 08, 2012
Jens Flottau Frankfurt
When British Airways and Iberia merged to form the International Airlines Group (IAG), it was clear that the effects of the combination would be felt across the various business units. But BA Engineering Director Garry Copeland does not want to rush into overambitious projects that would put its existing business at risk.
The two MRO subsidiaries within IAG, Iberia Maintenance and BA Engineering, could not be more different in some ways. BA Engineering has historically focused on serving the British Airways fleet; only 10-12% of its business is with customers outside of the group. By contrast, Iberia Maintenance has far more market exposure, with Iberia only accounting for 50% of its work and the company moving into more specialized fields, such as VIP completions, that it hopes will improve margins.
The big question is: How can such completely different companies and strategies be integrated in a sensible way? Copeland's answer is, “slowly.”
As part of the overall IAG integration, the MRO businesses have been given a €65 million ($84 million) synergy target for the initial five years. “We cooperate on a host of different issues,” says Copeland. For example, BA's Boeing 757s were maintained by Iberia until they were phased out. There are also joint projects in line maintenance, and the two companies often look after each other's external customers at airports where only one of the two IAG operating subsidiaries is present. “There are around 10 workstreams at any given time,” says Copeland.
Beyond the initial five-year planning, “all options are open,” he says, and that includes merging Iberia Maintenance and BA Engineering. “We just have not had the time yet to look at what is going to happen after five years.”
However, some strategy adjustments are already happening. Copeland wants to increase the share of third-party work to around 20% from the current 12%. At 20%, he thinks BA Engineering can still deliver the same quality and even while it grows to improve its critical mass.