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IAG lauds ownership-cost benefit of Level A330s

IAG has stressed that the ownership cost benefits of budget carrier Level's Airbus A330s outweigh the additional expenditure from having lower powerplant efficiency.

The airline has two A330-200s and is set to introduce three more for the next phase of its expansion.

IAG chief Willie Walsh states that the A330 is "a great aircraft in the current environment" but adds that company is "not wedded" to the type, and hints that the Boeing 787 – used by budget carrier Norwegian – could eventually succeed the twinjet.

"The 787 will be good in time," he told an investor briefing, but said there was only a limited number of qualified 787 pilots available.

He says that the A330 has low ownership costs and, despite being less fuel-efficient, has been the "right aircraft" to enable Level to develop quickly in the market.

Walsh states that, during a Barcelona-Los Angeles flight, a comparison flightplan was drawn up for a 787 in Norwegian's configuration.

The fuel burn for the Level A330 was 6t higher – around $3,500 at current fuel prices. Walsh says this is "insignificant" compared with the ownership cost differential with the 787.

Level could have 15-30 aircraft by 2022.

"We believe we've a lot of flexibility. We can scale this up quickly," says Walsh and, referring to a recruitment process at A330 operator Aer Lingus, adds: "I don't see a shortage of pilots."

Level will be profitable in its first year, outside of one-off start-up costs, which Walsh puts at less than €10 million including the allocation for establishment of a second base.

IAG selected Barcelona as Level's initial base but Walsh says that "at least" two of the three additional A330s which Level is preparing to introduce will be stationed in a different city.

Level will probably disclose its expansion plans around 28 November.

Walsh says there is a "lot of opportunity" open to the carrier, adding that the expansion phase would "probably" involve either Paris, Rome or a city in Germany.

He is impressed by Level's first-year performance, highlighting the absence of assumed cannibalisation of Iberia's network from Madrid.

"We've not seen that at all, it's been a real surprise to us," he says. "These are new customers flying with us – that's really encouraged us."

Walsh estimates a market for 90 aircraft rising to 120-130 in a "reasonable timeframe" but cautions that shifting to long-haul low-cost is not necessarily a sensible move for other companies.

"If you don't have the cost base you're going to lose a fortune," he says. "This is not easy. We can establish it with a completely new cost base, a new brand, and do it quickly."

He does not believe short-haul low-cost airlines will automatically expand into long-haul, suggesting the "very different" type of operation would serve as a "distraction".

"I don't think they have any chance of doing it better than us. We have experience in those markets," says Walsh. "Would I be afraid if they did it? Not at all, but I don't see it in the short term."

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