Airlines in Europe ready for low-cost battle

IAG CEO Willie Walsh says more cuts are needed

More cost cuts will have to be made at Europe’s flag carriers if they are to stay in the air and fight low-cost rivals, IAG CEO Willie Walsh says.

Air France-KLM, Lufthansa, British Airways, Iberia and others are continuing to cut jobs, renegotiate staff contracts, replace older aircraft, drop non-competitive routes and streamline back-office operations.

“We’re focused on reducing our cost base and making our short-haul business more efficient. […] Those that don’t will struggle to survive,” Walsh commented while at the World Low Cost Airlines Congress in London yesterday. “We have Vueling and I think every airline should aim to have an independent low-cost arm.”

Yet low-cost airlines are also struggling, with Ryanair saying it may miss its annual profit target due to low demand and Norwegian revealing that revenue per passenger is falling.

Recalling a previous failed attempt at British Airways to operate a low-cost airline, Go, Walsh said: “There was a lot of management interference in Go and it started cannibalising BA to some extent, so we have left Vueling as a separate, independent airline. [CEO] Alex Cruz is running Vueling the way he always has and we’re not changing his business model.”

Reuters

[image courtesy oneworld]

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