Vueling

British Airways parent IAG has continued its aircraft shopping spree with an order for up to 220 A320s.

Vueling is part of British Airways parent group IAGThe shopping lists consists of 58 firm orders and 62 options for Vueling, the low cost subsidiary based in Barcelona that IAG only took full control of in April of this year. Unlike IAG’s other Spanish holding, Iberia, which has been bleeding heavy losses, Vueling has been consistently profitable and this new order is a mark of just how much faith IAG’s top brass have in the airline.

Vueling currently operates an all Airbus fleet of 70 aircraft and although some of the new aircraft, set to be delivered from 2015 onwards, will be used for fleet replacement, an equal number will be used to aggressively chase market share in an already cut-throat European market.

British Airways Willie WalshCommenting on the order, Willie Walsh, CEO of IAG stated: “Vueling has managed to successfully expand its business profitably by targeting both growth markets and those areas where weak competitors are reducing capacity. These new aircraft will enable Vueling to continue that expansion and replace some of its older fleet with modern, fuel-efficient aircraft, leading to further unit cost reductions.”

On top of the 120 A320s earmarked specifically for Vueling, IAG also has options for a further 100 of the aircraft which may ultimately be assigned to either Vueling, Iberia or British Airways.

British Airways currently operates an all Airbus short-fleet out of Heathrow but has a number of ageing 737s based at Gatwick that need replacing. However, while IAG seems keen to commit to Vueling’s short-haul expansion, for British Airways the emphasis is very much on the renewal of its ageing long-haul fleet with 12 A380s on order, 42 787s 18 A350s & 6 777-300s. The first of the airline’s new A380s and 787s were recently delivered to the airline and go into normal service next month to Los Angeles & Toronto respectively.

 

British Airways parent company IAG has reported a return to profit in the last quarter.

IAGIAG, parent company of British Airways, Iberia and Vueling, reported an operating profit of 245 million euros (£214) for the second quarter of the year, a significant improvement on the 4 million euro loss reported for the same period last year.

The turn-around in fortunes is partly down to an improvement in trading at Iberia, with losses at 35 million euros, down from 95 million previously, but mainly a result of an increase in profits at British Airways , up from 94 million euros to 247 million euros. Vueling, which finally came under the control of IAG in April also contributed 26 million euros in profits for the quarter.

A poll tax on flying

Willie

Commenting on the results, IAG CEO Willie Walsh stated: “This is the first step in the restructuring but it is already bearing fruit with Iberia’s [second quarter] losses down from €93m last year to €35m, reversing the negative trend of the last 11 quarters”.

He went on to advise that more than 1,700 staff have now left Iberia since re-structuring of the airline begun, with remaining staff seeing signifcant cuts in their salary ranging from 11% to 18%.

With IAG’s results beating market expectations, IAG was this morning biggest rises on the FTSE 100 with the share price up 3.5% at 307.80.

A380-in-sky-landing

 

 

British Airways parent company, IAG, has reported a significant increase in capacity and passengers carried compared to June 2012 although this increase is entirely down to the takeover of Spanish low cost carrier Vueling.

Stripping out the effects of the takeover, the pattern of trade remains the same at IAG – a small growth in passenger numbers at British Airways but steep declines at Iberia.

 

Group Performance1 Month of June Year to Date
2013 2012 Change 2013 2012 Change
Passengers Carried (’000s) 6,531 5,048 29.4%  28,858 25,721 12.2%
Domestic (UK & Spain) 1,695 1,160 46.1%  6,482 5,534 17.1%
Europe 3,094 2,142 44.4%  13,082 10,798 21.2%
North America 845 802 5.4%  4,127 4,057 1.7%
Latin America & Caribbean 341 388 -12.1%  2,064 2,317 -10.9%
Africa, Middle East & S.Asia 410 421 -2.6%  2,319 2,270 2.2%
Asia Pacific 146 135 8.1%  784 745 5.2%
 

British Airways parent company, IAG, announced this week that it had raised 390 million euros in convertible bonds to facilitate the takeover of Vueling.

Willie Walsh

Willie Walsh

IAG already owned just under 46% of the Spanish carrier and, following an increased offer of 9.25 euros per share that finally won the backing of the board, will now see its stake rise to over 90%. Commenting on the bond issue, Willie Walsh, CEO of IAG had this to say: “We are raising cash to fund our acquisition of Vueling, an airline that will be a great addition to IAG. It will also enable IAG to have cash available to improve general liquidity and improve the credit profile of the group.”

Mr Walsh has already made it clear that Vueling will be run as a stand-alone business within IAG, and not as part of sister Spanish airline, Iberia.


The bonds are due to be issued on 31st May, with Banco Santander, UBS, Morgan Stanley & Barclays jointly managing the transaction.

IAG shares are currently trading at 275.50 pence, a substantial rise from a price of 152.30 pence exactly one year ago. At current prices the airline group is worth just under £5 billion.

Vueling is part of British Airways parent group IAG

Vueling is part of British Airways parent group IAG

British Airways parent company IAG this week finally gained control of Spanish low cost airline Vueling. Prior to taking control, IAG already owned over 45% of the airline but had seen its offer of 7 euros per share for the remainder of the airline rebuffed by the Vueling board. Having raised its offer to 9.25 euros per share, valuing the company at some 277 million euros, the board then recommended the offer and consequently IAG now own just over 90% of the airline.

British Airways Willie WalshIAG has been chasing Vueling, one of Europe’s few profitable airline, for some time now. With IAG’s existing Spanish carrier Iberia mired in huge losses, IAG’s CEO Willie Walsh sees Vueling as an opportunity to grow the business on a sound basis and, although nobody will say so in public, it is clear that IAG expect employees at Iberia to move towards salary levels and working practises at Vueling rather than the other way around. Mr Walsh has already made it clear that Vueling will continue to be run as a stand-alone business and will not be merged with Iberia or its own low cost carrier off-shoot, Iberia Express. “We plan to retain Vueling’s current business model and management structure and its strong base in Barcelona,” Walsh said. “It will benefit from the group’s financial strength.”

British Airways plc

 

Vuelling

The directors of Spanish low-cost carrier Vueling have recommended that shareholders accept the revised offer made by British Airways parent company IAG.

Vueling had earlier rejected an offer of 7 euros per share from IAG but has now accepted the revised offer of 9.30 which values the airline at some 277 million euros.  The airline’s shares were trading at 9.25 euros before today’s announcement while IAG shares were up by some 3% this morning to 244.33p.  Previously, IAG had sought to control some 90% of Vueling’s share capital but, in-hand with the higher offer, had revised this down to just over 50%.  As IAG already owns some 46% of Vueling, the actual cost to IAG of the takeover will be minimal.

iberia a330Willie Walsh, ex Chief Executive of British Airways and now head of IAG, has been chasing Vueling for some time now. The Spanish carrier is one of Europe’s few profitable airlines, contrasting markedly with the huge losses currently being suffered by Iberia, also part of IAG.

Willie Walsh

Willie Walsh

Mr Walsh has advised that he does not intend merging the 2 Spanish airlines although, with their conflicting performance, most industry observers fully expect Vueling to keep on growing, just as Iberia shrinks both its route network and number of employees.

 

VuellingFollowing on from our previous article, British Airways parent IAG has blinked first, increasing it’s offer price for Spanish low-cost carrier Vueling from 7 euros per share to 9.25 euros.  At the same time however, IAG has also said that it is now happy to settle for a simple majority stake in the airline rather than the previous aim to hold at least 90% of the company. In response to the new offer, shares in Vuelling this week rose to 9.24 euros while IAG shares slid. All this comes in the same week as British Airways sister airline, Iberia, parted company with its CEO.

Reports from the US claim that British Airways is planning to close its Jacksonville call centre, letting go of 280 employees in the process. The call centre was chosen back in 2000 and had been expected to employ far more than its current 280 employees; it would appear that the huge growth in internet bookings since then have sealed the centre’s fate.

Heathrow Terminal 5

Heathrow Terminal 5

Engineering support firm Babcock have been named as a preferred bidder on £440 worth of contracts at Heathrow; the work includes maintenance of British Airways ground fleet at Heathrow with the contract set to cover a 5 year period.

Unconfirmed reports from Malaysia claim that officials from British Airways have been to the country to review facilities and services at Kuala Lumpur International Airport. British Airways stopped flying to the Malaysian capital in 2000 but, with Malaysian Airlines now part of one world, a return may well be on the cards next year.

British Airways London City AirportCommencing 25th July, British Airways will be launching direct flights between London City Airport and the Spanish city of Granada. Located approximately 2hrs drive north from Malaga in southern Spain, Granada is primarily famous as being home to the superb Alhambra, one of the great European destinations in our humble opinion. The year-round service will be operated by Embraer 190 aircraft with fares starting from £85 one way.

 

Vueling

Spanish low-cost airline Vueling today rejected the offer made by IAG, parent company of British Airways, for the 54% of the company it still doesn’t own. The offer, of 7 euros a share, was made back in November but the board of Vueling have claimed that it doesn’t reflect the true value of the company.

With IAG’s existing Spanish carrier, Iberia, bleeding losses at an alarming rate, the far more efficient Vueling was seen by the IAG board as a way to re-model its business in a Spanish market which has been hit not just by continued economic decline but also fierce competition from other airlines (ie Easyjet and Ryanair) as well as high speed rail. Buying Vueling would not only give IAG a profitable partner in an important market, it would also act as an ‘incentive’ for Iberia unions to accept staff cuts and new conditions or risk losing routes and business to Vueling.

At the time IAG made their offer, it was at a significant premium to Vueling’s share prince;  since then however Vueling’s share price has risen strongly and is now itself trading at a premium of around 10% above the offer price. Time will tell just how highly IAG value Vueling and whether an improved offer is in the pipeline.