MRO Management

World Aviation Festival: IAG boss expresses interest in TAP privatisation

British Airways and Iberia parent IAG could be interested in taking TAP Air Portugal under its wing if the conditions of its impending privatisation are favourable.

Speaking at this week’s World Aviation Festival in Lisbon IAG chief executive Luis Gallego said the firm would always be interested in bringing “great brands” into its portfolio.

“IAG was formed in 2011 as a platform for consolidation. We are not an airline, we are a holding company for different airlines and we want to have the best airlines, the best brands under our umbrella.

“We are always open to having great companies and great brands under our portfolio and, to be honest, we want to see the conditions of the privatisation of TAP. It could be interesting for both of us.”

Gallego said IAG will use its scale to invest in Artificial Intelligence to “improve revenues, improve customer experience and reduce costs”.

The emerging technology will also be used in predictive maintenance and in procurement, area where AI is expected to give IAG an edge.

A new website is being developed for British Airways to improve the way the airline sells to its customers.

“In the past we did not have enough information about our customers. What we are doing is customise what we are selling to analyse what they want.

“With this new sit we can identify what they expect from us. It’s about how it’s all connected. Companies like ours have legacy systems. We need to change to be more efficient, to move to the cloud.”

Gallego said demand is very strong with only the business travel segment failing to come back entirely following the Covid pandemic.

Corporate demand in Spain has rebounded more quickly than in the UK after workers returned to their offices earlier.

In the second quarter of this year BA saw corporate travel hit 60% of pre-pandemic levels and 70% of revenues while Iberia saw 80% and 90% respectively.

Leisure and premium leisure demand is helping to offset the softness in corporate sector, Gallego said. He added the only question in the north Atlantic market is the return of corporate traffic.

“In September, it’s improving. We’re on track. After the pandemic we thought corporate traffic was going to come back to 85% of volume because of Zoom and Teams meetings.

“The reality is it’s going to take more time to arrive there. We think in a few years we will be back to 85% of volume.”

Gallego said banking sector flyers are coming back although there are concerns about sustainability among corporate who have cut travel budgets.

But he said: “Small and medium sized enterprises understand that having face-to-face meetings is fundamental for their business.”

BA is hedged for fuel to 70% for the reminder of 2023 and currently 40% for next year. “What’s important is what your competitors have,” said Gallego.

“In the north Atlantic American airlines do not hedge. We need to compete in that environment. If you see what’s happened in aviation in the past, sometimes with high fuel prices we have record profits.”

IAG is operating at 97% of 2019 capacity due to constraints related to new aircraft deliveries and supply chain issues as well as ATC strikes and the closure of airspace due to the war in Ukraine.

“Operation is critical. Last summer was very bad for customers. This summer was a lot better. The situation is better, but we still have a lot of challenges.

“We try to communicate to passengers about what we are doing, to be honest with them, to provide solutions when we have problems.

“We do not have enough spare parts so we need more back-up aircraft to maintain operations. We are putting everything in place to maintain service to customers.”

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