Today British Airways and Iberia parent company IAG (International Airlines Group) held its annual Capital Markets Day. At the center of the event is a presentation directed towards IAG shareholders and major investors. This presentation went over the airline group’s future plans, financial health, as well as its operational model and structure. Interestingly, at the top of one of the presentation slides it read “Major competitors are now seeking to adopt the IAG operating model”, with Ryanair and Lufthansa as two examples. So what is the IAG operating model and does the claim hold true? Let’s find out.
The IAG operating model
Based on page nine of the report, IAG’s operating model is based on several distinct airlines all falling under a “corporate parent” (IAG). Each airline falls within a market segment (full service, value, low-cost) but they all share “a platform of common services”. The list of common services includes:
- IAG Cargo
- Avios (loyalty program)
- IAG Connect (IAGs in-flight connectivity strategy and inflight e-commerce platform)
- IAG Global Business Services (IT, finance, procurement)
- and MRO/Fleet (Maintenance, repair and overhaul)
And that is pretty much how IAG operates at a very broad level. So why does the airline group think that Ryanair and Lufthansa are adopting this model?
Ryanair and Lufthansa
IAG believes Ryanair and Lufthansa are adopting its model because both “airlines” are in fact also parent companies of sorts:
- Ryanair Holdings PLC oversees several operating companies including Ryanair Designated Activity Company (DAC), Ryanair UK, Buzz, and Laudamotion.
- Lufthansa Group oversees Lufthansa the airline, SWISS, Austrian, Brussels Airlines, and Eurowings.
So yes, these parent companies do have their selection of airlines. In fact, Lufthansa Group has its Miles&More program in use across four of its airlines. Furthermore, the group has its own MRO company: Lufthansa Technik AG, which provides maintenance and repair services for Lufthansa Group aircraft but does business with many more airlines – including easyJet.
Are Lufthansa And Ryanair Copying IAG’s Group Model?
Looking at IAG as well as Ryanair and Lufthansa, we ask the question: Is IAG’s model being copied? I don’t think this is an easy question to answer. IAG was formed in 2011 after the merger of British Airways and Iberia. However, Lufthansa took over Swiss International Airlines in 2005. So who is really copying who?
The answer might just be that different airlines and companies are naturally discovering a business model that works best in today’s business environment. This model allows for acquired airlines to retain their historical identity and brand while giving travelers options for different levels of service at different price points.
Furthermore, all airlines benefit from the parent company’s investments in various platforms as well as having a common MRO company and common loyalty program. This model does seem the most efficient in terms of resource allocation and distribution.
It makes sense that IAG would want to “show-off” for its investors for a big presentation. However, the claim might be a little bit of a stretch. What do you think? Did Ryanair and Lufthansa Group copy IAG? Let us know by leaving a comment!
We requested comments from both Ryanair and Lufthansa. However, we have yet to receive any response from either group.