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Iberia CEO Says Now Is the Time to Invest and Expand

Edward Russell

June 3rd, 2022

Iberia is leading the recovery at International Airlines Group (IAG). The carrier continues to outperform its group peers in terms of the financial recovery, but CEO Javier Sánchez-Prieto does not see that as a signal to rest on his laurels as the industry emerges from the Covid-19.

“It’s a turning point for us post-pandemic. It’s time to invest, it’s time to take some risk,” he said in Washington, D.C., on June 2. Sánchez-Prieto arrived the day before on Iberia’s inaugural flight to Washington Dulles, a destination that the airline had planned to launch in May 2020 but was forced to postpone due to the pandemic.

A big part of that investment is expanding Iberia’s map. In addition to Washington, the airline is adding flights to Dallas-Fort Worth, Heraklion, Greece, and Nador, Morocco, this year, according to Cirium schedules. The new U.S. routes benefit from Iberia’s joint venture with American Airlines. U.S. capacity will be up 14 percent compared to 2019 this year. But the long-term focus for Iberia remains transforming Madrid into a “360-degree” hub — or one with connections in all directions, and not just between Europe and the Americas — Sánchez-Prieto said.

An expanded Madrid hub has long been a dream for Iberia and IAG. It was the rationale for the group’s bid for competitor Air Europa in 2019, which was dropped last December after regulatory pushback. IAG renewed its bid in March with a convertible loan deal with Globalia that it could convert to a 20 percent stake in Air Europa. That initial stake would be the basis for a full takeover of the airline within 18 months.

“The big opportunity is to develop Asia,” Sánchez-Prieto said. This aim, while not new for Iberia, was postponed by the pandemic and remains a long-term aim as border restrictions in many Asian countries remain.

Iberia hopes to resume flights to Tokyo in early 2023, Sánchez-Prieto said. He did not provide a timeline for a return to Shanghai, the airline’s only other East Asian destination prior to the crisis. Iberia suspended flights to both Shanghai and Tokyo in March 2020, Cirium schedule data show.

Another area where the carrier is investing is fleet. At the beginning of 2022, Iberia had 31 aircraft commitments with deliveries stretching through only 2024, and nearly half of those planes — 15 Airbus A320neos and A350-900s — are expected this year. The continued renewal of Iberia’s 100-aircraft strong fleet could include some of the up to 150 Boeing 737 Maxes that IAG ordered in May. “I think [the Max order] is very good for the group. We are analyzing now where to better place those planes,” Sánchez-Prieto said. IAG plans to announce airline placements for the aircraft by the fourth quarter.

Iberia, like many of its European peers, looks forward to a strong summer. System capacity will be at roughly 88 percent of 2019 levels with leisure and visiting friends and relatives (VFR) demand fully recovered, Sánchez-Prieto said. Corporate demand is down roughly 30 percent but continues to come back although differently than before, he added. He cited, by way of example, more combined business-and-leisure trips — or what some like to call “bleisure” travel. It aims to return to 2019 capacity levels by the end of the year.

IAG, including Iberia, anticipates quarterly profits from the June quarter onwards. Sánchez-Prieto confirmed this view.

The airline faces none of the staffing-related operational issues that some of its European competitors are dealing with owing to the Spanish government’s support during the pandemic, he said. Airline, airport, and air traffic control staffing have prompted warnings and disrupted operations at other European airlines. Some have even been forced to cut capacity, including Iberia’s sibling British Airways that has slashed schedules by 10 percent at London Heathrow through October.

“We are part of a network, and we are experiencing more and more problems in German airports or [in] Amsterdam,” Sánchez-Prieto said. “We don’t see those problems in the Spanish airports, or in Madrid … [But] we are not operating in an isolated environment.”

Asked if he had any concerns over a potential Eurozone recession later this year, Sánchez-Prieto said Iberia was keeping a “close eye” on the economic situation. However, many people have extra savings from during the pandemic and, despite the war in Ukraine and high energy prices, are still eager to travel. “I hope that all those external elements will come to a more moderate place in the following months,” he said but added that Iberia has not provided fourth quarter guidance due to the uncertainty.

While Sánchez-Prieto did not say that the pandemic was behind Iberia, he did say it was time to “turn the page” from the crisis. The airline is different today than in 2020, for example it is more agile and technologically-adept than when Covid-19 hit, and that’s a good thing in Sánchez-Prieto’s view.

“With a little bit of luck in terms of the macro, we can combine this robust recovery of the summer throughout the year and continue with the growth of the company,” he said. “We have a plan.”

Edward Russell

June 3rd, 2022

Photo credit: Iberia began flights to Washington Dulles airport on June 1. MWAA

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