IAG Hikes Projection for Long-Term Capacity Growth

 - November 2, 2018, 3:04 PM

Boasting it has stress-tested its financial model and its ability to turn a profit even amid a global economic downturn, International Airlines Group has revised upward its capacity planning goals and now intends to increase group-wide capacity 6 percent annually for the five-year period between 2019 to 2023.

The estimate compares with last year’s projection of a 5 percent growth rate from 2018 to 2022 and comes amid industrywide concerns of a deteriorating economic environment, higher fuels prices, and Brexit, IAG chief executive Willie Walsh told analysts during the group’s capital markets day on Friday. “People have expressed concern about too much capacity this year and already last year,” said Walsh. “We are very confident with the capacity we put in the market; it is very targeted in markets where we know we can grow profitably.”

IAG subsidiary British Airways will look at some additional long-haul aircraft for London Gatwick from 2020, and fellow group airline Aer Lingus will accelerate its growth rate on the North Atlantic with more routes aboard a mix of narrowbodies and widebodies. The Dublin-based carrier expects to receive 14 Airbus A321LRs to support its long-haul operations over the next five years, but Aer Lingus’s fleet investment plan presented Friday revealed the carrier will also add four A330s still “to be announced.”

The first two additional A330s arrive in 2020 and the second pair in 2022. “When we looked at cities outside the A321LR range, we had several airports telling us they were interested in a direct service from Dublin,” Walsh said. He said other IAG airlines already serve some of the destinations Aer Lingus is actively pursuing, adding that 70 of the 97 long-haul routes operated by the group’s airlines do not currently overlap.

Aer Lingus expects to receive its first three A321LRs in 2019, followed by five deliveries in 2020, four in 2012, and one each in 2022 and 2023. It plans to operate 14 of the type in 2023, though Aer Lingus CEO Stephen Kavanagh said that the airline continues “to review the opportunities that the potential XLR platform will bring over time.” Aer Lingus’s A321LRs will replace its four Boeing 757s, which it wet leases from ASL. The airline now flies eight A330-300s and four -200s, but according to the presentation, one -200 will leave in 2022. In summer 2023 Air Lingus’s fleet will consist of 30 aircraft, up from 17 now.

Walsh said he believed the industry will further consolidate in Europe with mergers and acquisitions and some failures of weaker carriers. In recent months, several airlines have collapsed, including Cyprus’s Cobalt Air and Primera. IAG continues to consider a controlling stake in Norwegian, but he said interest in taking over the Oslo-based low-cost carrier “is waning over time."

"A lot is happening in that company,” noted Walsh. “I get almost hourly updates. It’s fun to watch.”