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Annual report and accounts 2016

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13<br />

4 5 6<br />

Grow share of Europeto-Africa<br />

routes<br />

We achieve this by<br />

leveraging shorthaul growth<br />

opportunities <strong>and</strong> strengthening our<br />

presence in core established markets.<br />

Our performance in <strong>2016</strong><br />

Volatility continued across Africa in <strong>2016</strong><br />

with ongoing geopolitical issues <strong>and</strong><br />

suppressed commodity prices impacting<br />

traffic between Europe <strong>and</strong> Africa.<br />

North <strong>and</strong> West African nations were the<br />

most impacted by these issues <strong>and</strong>, as<br />

a result, IAG has proactively reduced its<br />

capacity into a number of destinations<br />

including Angola, Nigeria, Morocco,<br />

Tunisia <strong>and</strong> Ug<strong>and</strong>a.<br />

In South Africa, IAG has continued<br />

to enhance its network with the<br />

reintroduction of Iberia’s service to<br />

Johannesburg (after an absence of three<br />

years) along with greater British Airways<br />

frequencies on the Airbus A380 into<br />

Johannesburg <strong>and</strong> the launch of a new<br />

London Gatwick service to Cape Town.<br />

Stronger intra-Europe<br />

profitability<br />

We achieve this by<br />

optimising our legacy shorthaul networks,<br />

maximising commercial collaboration<br />

between our business units <strong>and</strong><br />

exp<strong>and</strong>ing our low cost carrier footprint.<br />

Our performance in <strong>2016</strong><br />

IAG has continued to improve intra-<br />

European profit performance despite<br />

the impact of multiple external<br />

events (including terrorist acts, air<br />

traffic controller strikes) <strong>and</strong> Vueling’s<br />

operational disruption during the summer<br />

peak. The Group has achieved this<br />

through a range of initiatives covering<br />

customer satisfaction, operational<br />

delivery, revenue optimisation <strong>and</strong><br />

cost control.<br />

Vueling’s summer disruption in<br />

Barcelona had an impact on its full year<br />

performance. After a comprehensive<br />

review, Vueling’s management has<br />

introduced a number of critical changes,<br />

including network rationalisation<br />

<strong>and</strong> overhaul of the airline’s fleet <strong>and</strong><br />

crew basing strategies, to improve<br />

operational resilience.<br />

Overall IAG intra-European capacity<br />

grew by 7 per cent in <strong>2016</strong>, incorporating<br />

a 9 per cent increase in capacity between<br />

home markets <strong>and</strong> the launch of 74<br />

new routes.<br />

Commercial collaboration across the<br />

Group has also continued to strengthen<br />

with the successful integration of<br />

Aer Lingus, further expansion of the<br />

Avios loyalty proposition <strong>and</strong> partner<br />

ecosystem, <strong>and</strong> deepening of intragroup<br />

codeshares <strong>and</strong> combined<br />

marketing efforts.<br />

Competitive cost<br />

positions across our<br />

businesses<br />

We achieve this by<br />

leveraging our scale, integrating best<br />

practices <strong>and</strong> driving simplification <strong>and</strong><br />

harmonisation across the Group.<br />

Our performance in <strong>2016</strong><br />

Over the course of <strong>2016</strong>, IAG renewed<br />

its focus on deepening <strong>and</strong> accelerating<br />

cost reduction programmes while<br />

at the same time ensuring customer<br />

value creation. At a Group level, IAG<br />

is driving the next level of efficiencies<br />

through its integrated platform within<br />

GBS (finance, procurement <strong>and</strong> IT) <strong>and</strong><br />

maintenance. Group synergies have also<br />

moved beyond the traditional centralised<br />

functions within GBS to include IAG<br />

Digital, IAG Cargo <strong>and</strong> Avios with a clear<br />

objective to drive further efficiencies <strong>and</strong><br />

value across the operating companies.<br />

At the operating company level, Iberia<br />

has commenced phase II of its “Plan de<br />

Futuro” focusing on further improving<br />

labour productivity <strong>and</strong> reducing<br />

overhead costs. British Airways has<br />

introduced “Plan4” which includes<br />

improvement of capital efficiency<br />

<strong>and</strong> overall cost competitiveness. In<br />

Barcelona, Vueling has commenced its<br />

“NEXT” business model enhancement<br />

programme focused on operational<br />

excellence <strong>and</strong> cost discipline <strong>and</strong>, in<br />

Dublin, Aer Lingus continues to deliver a<br />

range of productivity <strong>and</strong> cost initiatives<br />

to further improve its value carrier<br />

proposition <strong>and</strong> performance.<br />

Strategic <strong>report</strong> Corporate governance Financial statements Additional information<br />

www.iairgroup.com

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