IAG seeks to earn 1.5 billion with Iberia and Vueling and focuses on Latin America

IAG places its businesses in Spain at the core of its operations.

Oliver Thansan
Oliver Thansan
20 November 2023 Monday 15:27
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IAG seeks to earn 1.5 billion with Iberia and Vueling and focuses on Latin America

IAG places its businesses in Spain at the core of its operations. For the airline group, Iberia and Vueling, the two Spanish ones, along with Level, a low-cost airline, are two priority brands and, as expected, with high profitability. The parent company led by Luis Gallego has presented its future objectives to investors today and highlights that the objective is for Iberia and Vueling to report an operating profit to the group of 1,500 million in the medium term. In the first nine months of 2023, the Spanish flag airline earned 821 million while Vueling had a profit of 378 million.

At the Capital Markets Day, which was held in London, IAG presented its plan to “take advantage of Spanish businesses”. Specifically, the holding company considers that the routes with Latin America are a line of the present and the future, even more so if the merger with Air Europa is completed, which is in full negotiation with the competition authorities. “IAG wants to continue strengthening its leadership in this region,” the company explained. That is, Iberia and Vueling are in a position to climb the group's balance sheet to achieve "a better balance and greater diversification of profits in their portfolio."

In addition to the Spanish pillar, IAG has set three other strategic priorities for the period from 2024 to 2026. Among them is the group's transformation plan, which seeks to "improve the efficiency of operations and the customer experience." In this aspect, Iberia and Vueling are one step ahead, the company highlights. “To achieve this IAG is investing in innovation, information technologies and data; all supported by a culture of transformation, which is a key element to ensure the group's future resilience and sustainability,” he adds.

The group also plans to invest heavily in British Airways in the coming years. Specifically, the British airline will invest 750 million pounds - about 860 million euros - until 2026 in improving its information technology systems and another 100 million in the development of better operations. To this amount must be added an investment in fleet renewal of more than 6,000 million pounds sterling, about 6,900 million euros.

The fourth pillar of IAG's strategic plan is the best of the customer loyalty program, a commitment that, according to the company, “offers high margins, growth with a low capital requirement and sustainable cash flows with a lower profit profile seasonal than that of the airlines.”

IAG has also promised to restore the dividend in the medium term: “We will return to dividends carefully and sustainably once the investment program and balance sheet are secured,” explains the group.

Other challenges are achieving an operating margin of between 12% and 15% and a return on invested capital of between 13% and 16%. It also commits to maintaining leverage (net debt/EBITDA) of less than 1.8 times throughout the cycle.

IAG also proposes capital expenditures (capex) of 4,500 on average annually until 2026. It is an investment that exceeds 4,000 million this year and will be used to improve current operations and grow in new markets.

IAG CEO Luis Gallego explained that “we are working to expand our leadership positions in the North Atlantic and Latin American markets through the development of our hubs, while helping IAG Loyalty reach its full potential within the group.” .