IAG Picks Paris as Second Base for Discount AirlineBy
CEO Willie Walsh unveils plan for more transatlantic flights
IAG’s Level to offer one-way tickets to New York for EU129
British Airways owner IAG SA chose Paris as a second base for its discount airline Level, which will offer transatlantic flights to destinations like New York and the Caribbean as carriers compete to lower prices on longer routes.
Chief Executive Officer Willie Walsh unveiled the plan Tuesday in the French capital, which won out over Rome for the designation. Level plans to start offering in the coming months one-way tickets from Paris to New York for 129 euros ($154) and to Montreal, Guadeloupe and Martinique for 99 euros, he said.
"We believe long-haul, low-cost routes can be profitable," Walsh said. The airline, which currently operates only from Barcelona, will progressively replace the premium ‘OpenSkies’ brand and operate out of Paris’s Orly airport, which is also a hub for the group’s other low-cost airline, Vueling.
IAG is using Level to defend its markets against similar discount long-haul operations at Air France-KLM Group and Deutsche Lufthansa AG, as well as specialist low-cost operator Norwegian Air Shuttle ASA. The unveiling of a hub in France comes the same week as Air France prepares to roll out a new airline called Joon that it says will have lower fares than its flagship brand.
IAG picked Paris because of the number of tourists flocking to the city, OpenSkies head Patrick Malval said after the press conference, adding that he plans to leave the company around the end of the year for at least a few months.
Level currently serves Los Angeles, Oakland, Buenos Aires and Punta Cana in the Dominican Republic, and could add Asian routes by 2022, IAG has said previously. Barcelona, from where Level will start flights to Boston in March, was chosen as an initial base because it’s the main hub for Vueling.
Level operates two Airbus SE A330 planes and wants to establish a fleet of up to 30 aircraft by 2020 under a plan for rapid expansion, Walsh has said. Other destinations could include cities in Latin America, although getting new slots at Orly is difficult, he said. It’s evaluating opportunities for tapping the second-hand aircraft market, though it missed out on A330s from defunct Air Berlin Plc that were snapped up by Malaysia Airlines Bhd.
The expansion of Level is part of a global trend to extend the budget-airline model into long-distance flights, aided by advances such as more efficient composite materials-based planes like the Boeing Co. 787 and narrow-body models with significantly longer range, as exemplified by Airbus A321neo LR.
Walsh said rival no-frills airline Norwegian has demonstrated consumer appetite for cheaper, long-haul flights. Vueling will be profitable this year after stripping out “start-up costs” and Norwegian has a higher cost base than Level, he said.
The CEO said last month the industry may not have seen the end of systemic issues that led to the collapse of Britain’s Monarch Airlines and a bankruptcy filing at Italy’s Alitalia SpA, as well as the demise of Air Berlin.
IAG on Monday announced it is finalizing the purchase of operating rights at London Gatwick airport, most of which will go to BA.