IAG CEO Walsh to Renew Iberia Fleet After Earnings Recovery

British Airways parent IAG SA (IAG) plans to buy new aircraft for its Iberia arm after the Spanish unit cut losses, according to Chief Executive Officer Willie Walsh, who had made fleet renewal contingent on improved earnings.

IAG will most likely place an order that would firm up potential purchases already agreed with planemakers, Walsh said in an interview in Qatar. Iberia, whose requirements include replacing aging A340 long-haul jets, has options for as many as 32 Airbus Group NV (AIR) A350s and 12 Boeing Co. (BA) 787s.

“We’ve not made any commitment at this point,” Walsh said in Doha, where he’s attending the International Air Transport Association annual meeting. “We have options on various different aircraft types and we are evaluating those.”

Europe’s third-largest airline group is already adding long-haul planes at profitable BA, which last year introduced both the 787 Dreamliner and Airbus A380 superjumbo to its fleet, with the European manufacturer’s new A350 on firm order. IAG also holds up to 100 options for the re-enginged A320neo narrow-body model and has already funded new jets at its second Spanish business, discount operator Vueling SA of Barcelona.

Brighter Future

Madrid-based Iberia cut its operating loss almost by half to 111 million euros ($151 million) in the first quarter after Walsh eliminated the worst performing routes and pushed through 3,000 job cuts. He also sealed the last of three union deals in March, locking in pay for pilots, ground staff and cabin crew.

“You can’t make an investment in a business if you don’t believe it has a long-term future,” Walsh said today. “We are now convinced that Iberia has got the basis to justify significant investment in fleet. We’re really pleased with the turnaround in the company. The future looks at lot brighter.”

Iberia has 24 four-engine A340s in its fleet, comprising 17 342-seat -600 variants and seven 254-seat -300s, the carrier says on its website. The oldest planes date to the 1990s, according to the airfleets.net website.

While proclaiming himself “satisfied” with the size and structure of IAG, as International Consolidated Airlines Group SA is known, Walsh said there’s potential for acquisitions at the London-based group, which was established in 2011 with a name and structure designed to make consolidation easier.

The CEO appointed a taskforce to consider merger options in 2010, identifying 12 candidate airlines. IAG closed a deal to buy Deutsche Lufthansa AG’s U.K.-based BMI in 2012, securing scarce operating slots at BA’s London Heathrow base, and completed its takeover of Vueling last year.

“If the right opportunity presents itself, we’re ready and we’re capable of making a move,” Walsh said, adding that the company is “not actively pursuing anything at this stage.”

To contact the reporters on this story: Elliott Gotkine in Doha at egotkine@bloomberg.net; Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net Christopher Jasper

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.