Vueling CEO, Alex Cruz, has witnessed first-hand the blurring of the divide between European low-cost and legacy airlines, with most carriers now operating a type of hybrid model. He has been at the helm of an airline for five years, first at Barcelona-based clickair, then as the head of the combined airline. Before heading up clickair in 2006, he had built up a strong knowledge of airline operations and economics during a 10-year career with AMR Corp, the parent of American Airlines, in Dallas and London, and latterly as an aviation consultant. When Iberia decided to overhaul its operations at Barcelona’s El Prat Airport and team up with local investors to start the new airline, he was not the obvious choice, but in the subsequent years he has emerged as one of the world’s most respected airline bosses.
Now that the merged clickair and Vueling is turning a profit, he is focused on changing the dynamics of the low-cost/legacy airline relationship – a move that will further blur the divide between the two airline business models.
“In the past it was all about ancillary revenues,” he tells Routes News. “We were the same as most other airlines in this segment, looking at new ways to make a little bit more money, while keeping our costs low.
“We looked more at the ‘added value’ concept,” says Cruz, “studying products that would enhance our offering at a minimal cost to us but a great benefit to customers.”
An example was introducing a ‘save the fare’ opportunity, where passengers could pay a small charge to hold an airline ticket at the current fare, while they made other arrangements, such as booking accommodation and transfers.
This approach set Vueling apart from other European LCCs and, as Cruz noted, it is now “moving more towards operating as a traditional airline” rather than a budget operator “by growing the scope of our product”.
Working with Iberia
This has seen the airline take on a number of routes from Iberia at its Madrid Barajas hub, which are operated under the Vueling brand, but interlining and through-ticketing is provided to other destinations in the Iberia network.
This means that Vueling will not only be flying leisure travellers but also premium customers that are connecting on to Iberia’s long-haul network from Madrid. “We now have long-haul business-class passengers flying on a low-cost airline,” says Cruz. “We are conducting a bit of an experiment and are offering these customers preferential treatment, introducing them individually, providing check-in and boarding benefits and complimentary drinks onboard.”
The partnership initially covered a couple of Iberia’s flights from Madrid–Miami and São Paulo, but has since been extended to include Barcelona, owing to Iberia’s crew shortages. “We had geared up for this over the winter,” says Cruz. “We had our own recruitment drive to prepare for the summer schedules and extended our requirement so we were prepared to potentially pick up some routes. When Iberia came to us we had a long list of pre-screened and pre-cleared staff available.”
On March 1, the airline began operating Iberia’s flights to Madrid from Bucharest and Warsaw and in April added Fuerteventura, Lanzarote and Palma de Mallorca, as well as some of its services from Alicante and Malaga.
“It is early days but things seem to be going well,” says Cruz, adding that the airline is now working to also feed other oneworld members, including American Airlines, British Airways, LAN Airlines and Avianca, in Madrid.
“We don’t know how long this arrangement with Iberia will continue. It is only planned until the end of October but it will give us good experience and the potential to offer the service to others. We have already identified seven major European airports where we could potentially provide feed to the based airline and are hopeful that we could actually get some things set up by August/September,” adds Cruz.
To support this network growth, Vueling has agreed to lease five A320s from Iberia to provide the short-term capacity to support the schedules. “We are currently in a difficult situation as we have no firm information if this arrangement with Iberia will continue beyond the summer schedules. If it was to continue, then we could go out to the market and source aircraft on better terms,” says Cruz.
The airline now operates a fleet of over 40 A320s, ranging from three years to half a dozen with around 20 years’ service. It is considering buying new aircraft and is currently completing a preliminary renewal exercise ahead of the launch of a formal tender in the coming months.
London would clearly be an attractive market for Vueling, especially given the new British Airways and Iberia ownership structure. “Of all the hub airports where it would be natural for us to provide the spokes, London Heathrow is certainly the number one. There is a strong potential to connect to BA’s long-haul routes as there is a strong flow of traffic from north-west Spain in particular,” confirms Cruz.
It has three slot pairs at Heathrow; one is used for daily rotation to Bilbao, one for a daily service to La Coruña and one for a daily link to Seville. With little opportunity to secure additional slots there, it is to cut its Seville flight to four times per week, using the three additional slot pairs to add the new seasonal link to Vigo, which will likely launch during May.
The ability to think outside of the box is what has set Cruz and Vueling apart from others. “When you have such tight control over your cost structure, it is easier to make these decisions,” he says. Vueling currently has one of the lowest cost structures in the business, with costs per Available Seat Kilometre (ASK) of just four cents, second only to Ryanair in Europe. “That is what has enabled us to be where we are today, and we may be looking at new opportunities to improve our product and to push the boundaries, but we can only achieve this by keeping control of our costs,” he adds.
The aviation industry is constantly changing and nobody can prepare for what is around the corner. In the next year we just might see a low-cost carrier providing Business Class feeder traffic to the transatlantic flights of British Airways from London Heathrow. Cruz acknowledges that not even he would have considered that scenario on his first day as an airline CEO just five years ago.
This issue appears in Routes News 2011 Issue 3