IAG Chases Budget Long-Haul Travelers on Alitalia's Home Turf

  • Level to focus on Italy, France growth after Spain debut
  • Discount brand to add three planes in 2018, Walsh says

Level, the new budget airline from IAG SA, may start flying across the Atlantic from Rome in the latest bid by a low-cost carrier to capitalize on Alitalia SpA’s insolvency.

Level, which will lift its fleet of two Airbus SE A330 jets to five in 2018, will initially focus its expansion on Italy and France, IAG Chief Executive Officer Willie Walsh told reporters ahead of Level’s inaugural flight on Thursday. Rival Norwegian Air Shuttle ASA this week said it’s adding U.S. routes from Rome as bankruptcy proceedings force Alitalia to scale back.

“It’s clear that there is very strong demand in Rome, and even with the entry of Norwegian we believe there is a market there for Level,” Walsh said. Sales at Level, whose first service from Barcelona to Los Angeles began today, have been “well ahead of our expectations.”

IAG, which also owns British Airways and Iberia, has accelerated plans for its new Level offering as Europe’s biggest carriers respond to the emerging no-frills challenge led by Norwegian. By starting its routes a year earlier than planned, Level has beaten the Nordic brand to be the first to offer ultra cheap trans-Atlantic tickets, priced as low as 99 euros ($111), from the Spanish hub.

In addition to Rome, Level is considering new bases in Milan and Paris and will operate a codeshare agreement with British Airways’ joint-venture partner American Airlines Group Inc. on its U.S.-Barcelona routes. IAG also plans to expand the Italian network of its subsidiary Vueling in the wake of Alitalia’s administration, Walsh said.

“It would be sad if Alitalia disappears, but if it does it would be because it did not change to reflect the demands of the market,” Walsh said. “Airlines that don’t do what the market wants don’t deserve to be in business.”

Norwegian is set to start flying from Barcelona to the U.S. later this month as well as deploy Boeing Co. 737 Max jets on similar routes from the U.K. and Ireland. The Oslo-based carrier on Wednesday detailed plans to add services from Rome Fiumicino Airport to Los Angeles; Newark, New Jersey; and Oakland, California.

The airline is also studying options to begin operations at three airports in Germany, where the flailing Air Berlin Plc is in restructuring. Other destinations in Italy, Spain and the Czech Republic are under consideration as well, Norwegian’s Chief Commercial Officer Thomas Ramdahl said in an interview.

The expansion of the likes of Level and Norwegian into discount, long-haul flights is accelerating pressure on Europe’s legacy airlines which have already rapidly lost ground on intra-European routes to discount giants Ryanair Holdings Plc and EasyJet Plc. Air-France KLM Group and Deutsche Lufthansa AG are working to start similar long-haul operations to compete despite opposition from unions.

Ryanair has written to the Italian government offering to replace short-haul routes that are vacated by Alitalia during administration. The Irish discounter is also seeking to establish a feeder arrangement with the carrier that would allow its passengers to connect with Alitalia’s long-haul flights should it survive bankruptcy.

— With assistance by Justin Bachman

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