ABTN editor Martin Ferguson talks to the chief executive of Spanish airline Vueling
Alex Cruz would never be brazen enough to claim the Spanish recession has been a good thing. The booming economic growth enjoyed in the early noughties bust with devastating consequences when the global financial markets descended into freefall late in 2008. The number of unemployed has hit four million (20% of the workforce), more than double the Eurozone average. He knows as well as anyone that it's no laughing matter.
That said, Cruz's low-cost-cum-budget carrier - of which Iberia owns 40% - has been one of the few publicly quoted Spanish companies that has grown in stature and strength over the last two chaotic years.
How could that be possible, given the profundity of the crisis in Spain? One might reasonably ask. It appears Cruz - who was chief executive of budget carrier Clickair when it merged with rival Vueling in the summer of 2008 - has found a secret recipe for success in a niche within a niche and with a product that profitably walks the tightrope between budget and legacy customers.
Yes, Vueling is a budget airline, and does not pretend to be otherwise. However, depending on your class of ticket, you can have lounge access, baggage in the hold, preferential boarding, a reserved seat and extra space in the cabin. It even has its own frequent flyer scheme, Punto.
It has no plans to introduce a traditional business class cabin, but for a premium, you'll sit in one of the first three rows where the middle seat is left empty to give the traveller room to spread out. Bog-standard tickets for the back of the cabin remain cheerfully cheap.
"It has been a journey for us," says Cruz. "We were born, we lost some money, we merged with a competitor, we made some money, and next year we're looking to add six aircraft to the fleet.
"The downturn in Spain had an impact on demand, many [travellers] started to down-trade to cheaper carriers and so we saw a dramatic increase in the number of business travellers. Millions flew with us on business last year and I think many will stay with us."
Like most budget carriers across Europe, the business model works best when customers book direct and snap up the ancillaries on offer. Cruz is also under no illusion that unbundled airfares are necessary for some airlines if they are to maximise revenues. But the company is also trade-friendly, working with most of the top agencies - both corporate and leisure - in Spain and supplying content through the Travelport and Amadeus global distribution systems (GDSs).
It's no surprise Vueling does best domestically, but Cruz says traffic both ways with the French, German and Dutch markets has come back strongly this year. But at present, the airline flies daily out of Heathrow to A Coruna in Galicia, Bilbao in the Basque Country and Seville in Andalucia. He's eager to expand the network out of the UK (there are some seasonal services such as Edinburgh-Barcelona) but admits that now might not be the right time. He bemoans the fact that slots at Heathrow are so scarce, and says: "I have to be cautious about entering a market where easyJet and Ryanair are so dominant and where our brand is unknown. It is difficult."
Make no mistake, Cruz does not fear Ryanair or easyJet (or the Irish and the Orange, as he refers to them throughout our interview). Indeed, Vueling goes head-to head against both in other markets and more than holds its own. "We are not intimidated by them," he insists. "But we are aware of their strengths."
Looking ahead, Cruz is, like almost everyone in the corporate world, "cautiously optimistic" about potential for growth and profitability in 2011. "As we're quoted on the stack market, I can't reveal our exact forecast," he says. "But we've told the markets that our net margins this year will be better than last. Against the economic backdrop it means we are in good shape.
"I am conservative about the prospects for next year, but at the same time I am optimistic. All I can say is that we have to be prepared. If the situation is no better we have to focus on having the lowest possible cost base, while at the same time be ready for any growth opportunities."
Finally, I ask Cruz about consolidation and the potential for the airline to work closer with its majority shareholder, Iberia. But I find out that things are not so simple in Spain.
"We have code shares with Iberia on some routes and this works very well for us. I think in the future we could benefit from feeding traffic to the Iberia network with strategic code shares."
But isn't there potential for more? It's complicated. In order to protect the interests of Vueling's shareholders from any Iberia interference, a committee exists to act as a buffer (Spanish law usually puts a 30% cap on how much a company can buy into a competitor) between the majority shareholder and the rest.
Cruz won't be drawn on specifics or speculation, suffice to say that any move by the International Airlines Group, which has British Airways and Iberia at its helm, would have to overcome some significant hurdles if it were to develop closer ties with Vueling.
Vueling's Q3 results are due out on October 26.
www.vueling.com