By Benjamin Katz
British Airways-owner IAG SA is looking at acquiring more long-range narrow-body planes in order to open up intercontinental routes where demand is insufficient to support bigger twin-aisle jets.
IAG has already ordered seven LR variants of the Airbus Group SE A321neo for trans-Atlantic services at Irish unit Aer Lingus and is evaluating plans for a wider roll-out that could see the model deployed in the UK with BA and at Spanish unit Iberia, Chief Executive Officer Willie Walsh said Friday.
While the additional planes would also serve North America, they could likewise open up new markets in sub-Saharan Africa, Walsh said after IAG posted an 8.6 percent gain in full-year earnings. Adding such flights would help counter the introduction of groundbreaking long-distance narrow-body services by rivals including Norwegian Air Shuttle ASA, even as IAG slows overall capacity growth.
“We’ll be looking to utilize that aircraft right across our network,” Walsh said of the A321neoLR, which is slated to enter service late next year. “There’s an opportunity to consider quite a number of destinations that we wouldn’t believe possible with the wide-body larger aircraft.”
Walsh spoke a day after Norwegian Air presented details of flights from five locations in Britain and Ireland to three low-fee airfields in New York state, Rhode Island and Connecticut, to be served by Boeing Co.’s 737 Max 8 model from June with one-way fares starting at 69 pounds or 69 euros ($86/$73).
While the Boeing jets will be operating close to the limits of their range, Norwegian Air has also ordered 30 A321neoLRs with which it could connect dozens of smaller cities either side of the Atlantic in the medium term.
Aer Lingus already operates long-haul flights with a fleet of Boeing 757s, the only narrow-body model to see regular use on non-stop Europe-US services, but which ceased production in 2004. The seven A321s on order will serve as replacements while also adding new routes.
The Irish unit began serving Hartford from Dublin last year and IAG has said that several other smaller US airports are keen to attract flights with competitive fees.
Walsh said on a conference call with analysts that the introductory fares offered this week by Norwegian Air aren’t sustainable. “Norwegian has a very small margin of profitability and the fares that they’ve launched are clearly just designed to get some headline media coverage,” he said.
Details of a new low-cost wide-body operation that will operate flights across the Atlantic from Barcelona will be revealed “in the very near future.” IAG aims to fill the Airbus A330 planes with feeder traffic from short-haul unit Vueling, which is based in the Spanish city.
Norwegian has said that it also envisages adding long-haul discount flights from Barcelona using its Boeing 787 wide-bodies, possibly to South America. It already operates the Dreamliner from airports including London Gatwick, the main leisure hub for British Airways.
IAG will boost capacity 2.5 percent this year following a 4.3 percent increase in 2016, Walsh said. Aer Lingus will grow fastest, adding almost 16 percent more seats, while BA, which is far larger, is set to expand just 1.5 percent.
The group’s operating profit rose to 2.54 billion euros last year, excluding one-time items, as fuel costs fell and it limited capital spending in response to Britain’s vote to quit the European Union. Walsh is predicting improved earnings again this year, and said that a decline in fares amid industry overcapacity appears to be moderating.
IAG rose as much as 2.9 percent after the company said it would buy back 500 million euros of shares, and was trading 1.8 percent higher at 513.50 pence as of 12:20 p.m. in London.
The stock has gained 16 percent this year following a 28 percent decline in 2016, mostly in the wake of the Brexit vote