ANALYSIS: IAG leaves Vueling free to pursue European goals

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New owner IAG has emphasised that it will be business as usual for recently acquired Spanish low-cost carrier Vueling, which will be left alone to continue its pan-European growth strategy.

IAG, which is parent of British Airways and Iberia, acquired a majority stake the Barcelona-based airline in April, and has just further increased its holding to 97.52%. IAG had previously held a large minority stake as a legacy of Iberia's involvement in the airline before the creation of IAG.

The fast-growing Vueling will contribute a 7.6% increase in capacity to IAG's combined 2013 available seat-kilometres (ASK). This contribution will see the group end its 2013 fiscal year with 5.2% year-on-year rise in capacity, as it combines with BA's 5.7% growth to more than offset Iberia's 14.9% ASK decline.

Speaking during IAG's second quarter analysts' call, Vueling chief executive Alex Cruz was clear that the carrier would not be changing strategy under its new owners: "There aren't any significant changes in terms of network development [resulting from the IAG acquisition]," he said.

"The ambition to be a pan-European airline is very much on track. The amount of increased activity at existing bases, and the search for new bases year on year continues. As we find opportunities to take on existing demand, or stimulate new demand, we will do that. And that's what IAG is expecting of us - profitably of course."

This view was supported by IAG chief executive Willie Walsh. "Alex has a total free hand to compete aggressively with every one of our competitors, but clearly we don't look at Vueling competing with British Airways or Iberia," he says.

"The targeted market growth is very much focused on where Alex has identified weak competitors and we expect him to continue to do that. And we're not going to stand in the way of anything he does. There have been changes at Iberia and bringing in Alex as part of the IAG group has enhanced the contribution and the debate at the IAG management team level."

Vueling's fleet comprises more than 70 Airbus A320 family aircraft serving 111 destinations. The airline will carry 16 million passengers in 2013 and its ASKs rose by 25% in second quarter of the year.

"This has been driven both by increased stage length [+8%] because we're flying to further away places, as well as seats - which are about 15 points of that increase," Cruz says.

"More that 50% of our traffic does not originate in Spain, and the focus of the last two or three years has been to capture [more international traffic]," he adds.

 vueling international
 Source: IAG

Cruz highlights Germany and Scandinavia and Russia as markets where it has seen significant growth.

vueling capacity 
Source: IAG

"We are beginning to increase our presence in terms of traffic and aircraft across the whole of the European region," adds Cruz. "The bulk of our aircraft are parked overnight in Spain but we have the equivalent of nearly four aircraft in Paris, two in Rome and Amsterdam, and one in Copenhagen, Stockholm and Moscow."

The low-cost carrier is focused on continuously driving down cost, and has already captured €14 million ($18.5 million) of its €17.7 million 2013 cost-reduction target. Cruz expects that being part of IAG will bring further gains, saying it will give Vueling access "to volume discounts over the coming months".