Miguel Concepción Cáceres: Expanding Spain’s Islas Airways

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Islas Airways isn’t exactly a household name outside Spain’s Canary Islands. The tiny Tenerife-based carrier is not even the largest carrier in the Canary Islands and currently only operates within the archipelago using a fleet of five ATR turboprops.

But if owner and chief executive Miguel Concepción Cáceres gets his way, Islas will be flying into European capital cities in two to three years. “First of all we want to increase and consolidate our market share [on inter-island routes],” Cáceres says. “In two years we’ll be ready to look at jets and to go to European capitals.”

Cáceres’ first goal is to increase Islas’ inter-island market share from 30% to 50% by 2009. To accomplish this, Cáceres says he must expand and modernise Islas’ fleet. The only other airline based in the Canary Islands, Grand Canaria-based Binter Canarias, currently has a 70% share of the interisland market and operates a much larger fleet consisting mainly of new-model ATR 72-500 turboprops.

Islas last year placed an order for six new 70-seat ATR 72-500s and Cáceres stopped at the Paris Air Show last week to extend this deal to include two options. Cáceres is pictured (middle) after signing the new deal with ATR chairman Filippo Bagnato (left) and new ATR chief executive Stéphane Mayer (right).

Islas now operates four older-model ATR 72-200s and one smaller ATR 42-300. Cáceres says the first two new ATR 72-500s, which will be delivered later this year, will be used to replace its two oldest ATR 72-200s, which are being leased from the manufacturer. The third and fourth ATR 72-500s will be used to increase frequencies on existing interisland routes. The fifth and sixth ATR 72-500s will be used to expand the carrier’s interisland network.

Islas and Binter already compete on many interisland routes and Cáceres plans to launch services over the next two years on those markets that currently only Binter serves. Binter also serves North Africa and until earlier this year served Paris using wet-leased Boeing 737s.

Cáceres says that if Islas decides to exercise the two new options for ATR 72-500s they would be used to replace Islas’ last two ATR 72-200s. He says Islas’ ATR 42, which is now used as a spare to back up the four ATR 72-200s, will be sold.

ATR says about three million passengers now fly annually within the Canary Islands archipelago and the market has been growing at a 9% clip. Last year Islas flew over 500,000 passengers and generated about €28 million ($38 million) in revenues.

New codeshares
Cáceres also seeks to grow Islas’ business by partnering with larger carriers. He says Islas already codeshares with Spanair, which serves the Canary Islands from mainland Spain and several major European cities. Islas also has an interline deal with Spanish carrier Air Europa, which also links the Canary Islands with mainland Spain and continental Europe.

Cáceres adds Islas is now negotiating a possible codeshare deal with Iberia. The Spanish flag carrier already has strong links with Binter, a former Iberia subsidiary.

Cáceres says Islas has hired Amadeus to upgrade its IT and reservation system. The IT upgrade, he adds, will help Islas link up with larger carriers and facilitate e-ticket interlines and codeshares.

Islas was founded in 2003 by the owner and chief executive of Venezuela’s Santa Barbara Airlines, Francisco Gonzalez. In late 2005 Gonzalez sold 50% of Islas to Cáceres, who owns several other businesses in the Canary Islands and mainland Spain. Gonzalez, a Canary Island native, has since sold additional stakes to Cáceres, who says he is now the majority owner of Islas but declines to say what size stake he currently holds.

There are seven islands in the Canary Islands archipelago and several of the smaller islands have small airstrips that can only be accessed by turboprops with short takeoff and landing capability. The islands are too spread out to be linked quickly by ship but by air they are linked with flights of only 30 to 45 minutes. All routes are currently subsidised by the government to facilitate travel between the islands for local residents.

“Air transport is very important to the islands,” says Islas director of operations Mario Goldberg. “All the islands are separated and it is important for the smaller islands to have good connections with the bigger islands.”

Goldberg adds that residents of the smaller islands need to travel to the larger islands when they require medical assistance. Families are also frequently spread out over multiple islands and most of Islas’ traffic is ethnic, he says. Goldberg, a former Santa Barbara Airlines chief operating officer, helped Gonzalez launch Islas in 2003 and continued to oversee day-to-day management of Islas after the carrier was bought by Cáceres.

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