Iberia chief executive Luis Gallego points to the Spanish carrier's financial turnaround having been achieved without the benefits of the tumbling fuel price, which will only start to be reaped this year.

The IAG-owned airline's eye-catching turnaround was underlined last month when it disclosed a €247 million ($273 million) operating profit for the full year – its best financial performance for almost a decade.

While the sharp fall in the oil price has given airlines a welcome alleviation of their largest cost burden, Gallego says this has not been a major factor in Iberia's turnaround. Speaking to Flightglobal after addressing the European Aviation Club in Brussels on 14 March, Gallego said the airline's turnaround programme was based on improving its cost base before fuel.

"We didn't want to have good numbers because of the fuel. We wanted a company that can survive with a high fuel or low fuel [price]. If you look at the results in 2015, we only captured a fraction of the fuel benefit in the last quarter, because of hedging and because we pay for our fuel in dollars.

"So, in the end, we didn't have an advantage. We will capture an advantage as time advances," he says. "All the improvement in the result, up until now, is not linked with fuel."

That turnaround strategy included tackling both its cost and revenue position. "We didn't have an advantage in CASK or in the RASK, so we needed to change," he explains.

A major restructuring ensued, including the creation of Iberia Express as a means of renewing short-haul strategy to help feed the long-haul network. "Around 35% of our long-haul traffic was point to point. So we if didn't have a more efficient short-haul model, we didn't have a company," Gallego observes.

This formed part of a wider restructuring which included a 15% reduction in capacity under which routes, aircraft and jobs were cut.

Iberia subsequently returned to growth after securing productivity gains agreed in 2014 labour deals and has since restored capacity to pre-restructuring levels. "With the same capacity as 2012, we have a reduction in the CASK per aircraft of 25%," notes Gallego. "So we have moved the position of Iberia in costs and RASKS."

But he cautions that the carrier is only halfway there and notes the carrier's long-term aim of achieving a 15% return on invested capital between 2017 and 2020.

The Spanish carrier will continue work on finalising its current three-year redundancy programme, which it launched in 2014 and under which it is cutting 1,427 jobs. Gallego says there is room for 462 people in the current scheme. "The idea is to finalise that this year," he says. While the carrier has begun recruiting pilots again, it will look for further cuts elsewhere. "We will sit down with the unions to come up with a a new redundancy programme," says Gallego, though he stresses the scheme would be voluntary.

Source: Cirium Dashboard