IAG chief executive Willie Walsh updated city analysts about the company’s plans across a range of issues on Friday. Here’s a summary of the main points
Bmi integration....
“I’m pleased to say it is going very well and making very good progress. We have started the transfer of Bmi – so far eight out of 25 aircraft in Bmi have been converted into BA colours and on to the BA AOC. Two A330s in Bmi will not be transferred to BA and will leave the fleet. We completed the employee consultation on Bmibaby and have decided to close the business with effect from September 9 this year.”
Iberia restructuring...
“We always said there would be restructuring within Iberia but now we are committed to further restructuring. The scale and timescale of restructuring is accelerating because of the weakening financial situation and environment in Spain. Iberia’s short and medium-haul did not make money and the long-haul profits are still not sufficient to make up for this. Iberia’s cost base and conditions are out of line with the market. Both short and long-haul need fundamental structural change. We do not have that plan finalised yet – the development of the business plan will continue over the next few weeks and we hope to finish it by the end of September. “
Possible Spanish exit from the euro...
“We have a small team working with external advisors on this. Clearly this is what you would expect any company to do in terms of risk management. The plan is quite detailed and I believe more advanced than most other companies operating in the current environment. We will continue to update the audit committee and board on a regular basis.”
Financial outlook...
“A number of factors have improved in he last three months – BA’s business remains firm and the Bmi integration remains on track. We were previously targeting break-even this year, however in the light of Spain’s macro-economic headwinds we are now forecasting a small operating loss in 2012.”
Capacity...
“Most of the underlying growth is mainly in BA and that reflects what we believe is strong demand out of London. London is not like the rest of the UK which is suffering from weak economic conditions – London’s performance remains good. Premium travel growth has been stronger in BA. We will continue to look at our network – there will inevitably be reductions in Iberia but its’ too early to say when that will take effect.”
Qantas’s talks with Emirates...
“We don’t see any problem with this – we have been kept fully appraised of the talks from the beginning. I’m completely relaxed from a BA point of view and a Oneworld point of view about the discussions they have been having and about what it might lead to.”
Taking a financial stake in American Airlines...
“We are open to that if there’s a strong strategic argument for investment. But it would be a small investment and not of any major significant scale. We have not looked at doing it at this stage. I would say it’s unlikely but we remain open to looking at it – it has to have some strategic value and provide additional benefit in terms of the way we do business.”
Gatwick operations...
“We are continuing to restructure the business and believe that Gatwick has an important role both for BA and also potentially within the IAG group. Fleet replacement will be reviewed early next year and the management team at Gatwick have been tasked with coming up with a business plan looking at several options. But we don’t have to make a decision on this until the second half of next year.”
London City expansion...
“The introduction of the Embraer aircraft has been really positive and we are pleased with the performance of London City as it’s ahead of its financial targets and well ahead of previous performance, although the short-haul premium side of the business continues to structurally decline.
The competitive environment is changing – we have seen the main competitor Cityjet reduce its presence at London City. The future of Cityjet is very much uncertain given the review of Air France but I should make it clear that we have absolutely no interest in acquiring Cityjet. Clearly their retreat from London City has given us an opportunity because it has made flights available at peak slots. There’s some scope to increase our presence at London City but it will not be on any significant scale.”
Olympics impact...
“It looks like it will play out exactly the way we thought it would. The traffic statistics for July show premium was up 1.5 per cent compared to the previous year but it has hit premium traffic in August more than July. In the longer term, we think it will have a very beneficial effect for the BA business. It’s possible that there will be a short-term “halo effect” after the Games that will come through in the fourth quarter but we are not seeing anything like that yet. “
iagshares.com