International Airlines Group CEO Willie Walsh speaks at the World ATM Congress in Madrid.
Speaking at the World ATM Congress in Madrid Tuesday, IAG CEO Willie Walsh said this “next generation, long-haul operation” was expected to begin operating services with two Airbus A330 aircraft this summer, probably June.
Explaining some of the strategy behind this new operation for IAG, Walsh said: “It is critical is that we learn from our mistakes and one area where legacy airlines were slow to react many years ago was the rise of the low-cost (LCC), short-haul airline, especially in Europe. Many airlines, including British Airways and Ireland’s Aer Lingus, did not perceive the likes of [Irish LCC] Ryanair and [UK LCC] easyJet as a threat, more as a novelty that would quickly disappear. Over time they realized that the new kids on the block were not going to disappear so they eventually adapted their business to include some of the best features of the LCC while maintaining premium service where that service was valued by consumers.”
He acknowledged that initially it was believed the low-cost model, while acceptable to passengers on a two- to three-hour short-haul flight, would not transfer to the long-haul market because of a lack of consumer demand.
“However, in the last couple of years, that perception has changed and the rise of Norwegian has shown that customers are willing to accept a low-cost product on longer duration flights. So having learned the lessons of being slow to adapt many years ago to short-haul, low-cost, IAG is determined to play its part in the long-haul market,” Walsh said.
Destinations under consideration include Los Angeles and San Francisco on the US west coast; Buenos Aires and Santiago in Latin America, Havana, and even Tokyo in Asia. And discussions are underway with “lots of airports,” Walsh told ATW, not just main or secondary hubs.
He described the IAG move as “a response to Norwegian, but not in direct response,” saying it was something the group had been considering for some time.
“I have always said I am a big fan of what Bjorn [Kjos] has done. We have supported their application for traffic rights with their Irish AOC [air operator’s certificate] and we have always said the response they would see from us would be a competitive one. So it is partly a competitive response to Norwegian, but we also believe this is a market segment that will see significant growth and we believe that we can operate in that segment and generate the financial returns and targets that we set for all the airlines in the group. We are a multi-airline, multi-brand organization so we believe we can succeed in this segment where some other airlines with their brands will struggle. We’re very encouraged by what we’ve seen in terms of consumer trends and it is the start of something that I think is going to be very significant for us.”
Walsh said IAG had looked closely at why other low-cost, long-haul operations had been unsuccessful and tried to understand what went wrong.
“We’ve been very impressed by what Norwegian has done in terms of the customer proposition they have offered, unbundling the product in a way the low-cost airlines did, which I think most traditional carriers felt would have been difficult if not impossible to do on long haul,” Walsh said. “We learned from our mistakes with the likes of Ryanair and easyJet and that’s why, having analyzed this for a number of years, we believe that now is the right time for us to do it.”
IAG’s existing Barcelona-based LCC, Vueling, will continue to focus on short haul and will feed the new long-haul operation.
“If you look at how the model works—and Bjorn has been very public about this—for the long haul to be successful it has to have short-haul feeds. And that’s why Barcelona is a perfect opportunity for us because we’ve got a fantastic short haul network feeding that airport,” Walsh told ATW.
IAG is still evaluating a number of brand name options and expects to make a final decision “within the next few days,” Walsh said.