Iberia have played the game very well in relation to Vueling. Unfortunately that cant be said for the business as a whole...
Vueling
Upstart low cost set up in BCN to directly attack what has always been seen as Iberias failure to establish a hub there and instead make the Catalans fly to Madrid first. Vueling was set up with backing and business model of Jetblue with quite a few ex Virgin staff...
Needless to say Iberia didnīt like this so set up Clickair cleverly diverting both Ac and resources to the new company which helped the IB bottom line by reducing liabilities. Putting in an "airline analyst" from Accenture (not sure - might be one of the other big finance houses) as CEO and you could see from day one what the deal was... Transfer loss making routes and Ac to Clickair and let them attack Vueling at the same time. (Note: Any new airline in Spain is hounded by IB or its affiliate Air Nostrum until he who has the biggest pockets wins).
Coming to the present day... Vueling and Clickair have been losing money constantly since day one. Who has the deepest pockets... IB. Who takes control of a large and well entrenched low cost airline with a Barcelona base and no incumbent competition??? IB... So jonny foreigner who wanted to take some of Spains market from IB... its time you went home. All of which being perfectly legal within the somewhat "young" Spanish business legal system.
So Iberia won the "battle"...
BUT...
Iberia appears to have lost the "war", whilst their little fun and games in BCN have worked out well their big gameplan to produce record profits and sell the company to another airline or investment house has come tumbling down. In much the same way as the housing market in Spain has been growing at 20-30% a year so has everthing else.... all based on CREDIT... Acuasitions of companies like BAA have been financed through credit which is now begining to bite. How does this affect IBeria?
Iberia has not invested in just about anything for the last 4 years and where it did order A320īs these were quickly sold on to Clickair at a paper profit (anyone remember the new 320īs that were in storage in TLS a few yrs ago... IBīs). Everything that could be sold, has been sold or spun off... The share price climbed and climbed, the Spanish banks piled in... and then the crunch came:
No one wants to buy Iberia... why? Old aircraft, over inflated share price, long haul fleet renewal due shortly, short haul fleet needed urgently (replace those MD 80īs). They played high stakes and lost. So whats left now:
- Fuel hungry Ac
- No assets left to sell
- Spanish domestic market collapsing
Interesting times.... especially when they still talk about how theyīll need the A380!!!
PS: Caja Madrid, one of Spains biggest banks, has lost over M240 in the 55% decline in Iberias share price since Jan... Ironic really as it was them that scuppered any sale by wanting an ever higher price for the company.