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 />
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