Transcription
Iberia Investor Seminar12th December 2014
Iberia Investor Seminar - AgendaTimeTopic08:30Registration and welcome coffee09:00Opening speechA. Vázquez09:20,EHULD¶V 3ODQ GH FuturoL. Gallego09:50Transformation vignettes I- Commercial Plan overview- Boosting our RASK- Focusing on the customer- Enhancing the way we sellM. SansaviniJ. Harrison, B. GuillénC. Martinoli, D. BountolosM. Henales, F. MartínezSpeaker11:00Coffee break11:20Transformation vignettes II- Reducing our cost base- Achieving lean processes- Transforming SH business- Ensuring the right LH strategyJ.A. Barrionuevo, A. García TorresR. J. Hoyos, J. ElicesN. Chernoff, F. CandelaN. Chernoff, A. Pimentel12:40The Iberia of the futureL. Gallego, J. Sánchez-Prieto13:00Q&A14:15Tapas lunch15:00Airport transfer2
Iberia has an ambitious medium term target, in line with theobjectives set by IAG2014e2017-2020Lease adjustedoperating margin (%)c. 3%10-14%RoIC (real terms)1(%)c. 4%12% Equity FCF2(¼m) 0200-300Cash return toshareholdersSustainable cash generation1 Real returns applicable to all airlines: (operating profit leases*33%)/(adjusted depreciation*10)Plan de Futuro2 Equity FCF: EBITDAR Rentals Interests - Taxes - CapexMedium term planninggoals3
At CMD we showed you we had delivered on what we said two yearsago; today we will give you more insight2012 CMD objectives achievedTo stop ,EHULD¶Voperating cash burnby mid-2013To give Iberia acompetitive costbase for long-termgrowth (15% capacityand 4,500 workforcereduction)To fund thetransformation entirelythrough ,EHULD¶V ownresourcesPlan de Futuro« Comprehensive plan aimedto radically change thecompany 30 initiatives across allkey areas of the company Continuous monitoring bytop management Full commitment todeliveryPlan de FuturoObjectives« LV VKDSLQJ WKH ,EHULD RI WKH IXWXUH Plan de Futuro will allow Iberiato reach positive results in2014 after 6 years of ORVVHV« « SURYLGHV ,EHULD with anattractive strategicpositioning in core markets(specially Europe-LatAm) «VHWV the basis for profitabilityand long-term growth- Margins in IAG target rangefrom 2017 onwards- Strong growth prospects- Free cash generation from20144
Iberia FRPHV IURP D YHU\ FULWLFDO VLWXDWLRQ«TransformationPlanOperating profit (margin %), 9334,8284,9615,1924,401Plan de FuturoFinancial context2011201220135
« GXH WR D FRPELQDWLRQ RI H[WHUQDO DQG LQWHUQDO IDFWRUVExternal factorsInternal factorsChange in industrystructureCorporate complexityUnfavourable macro contextInefficient cost structureLegal restrictions inrestructuringOutdated network andcommercial positioningtiPlan de FuturoIndustry context6
,EHULD¶V WXUQDURXQG VWDUWHG ZLWK WKH UHVWUXFWXULQJ LQ WKH 1RY 7UDQVIRUPDWLRQ 3ODQ«1Focus on corenetworko Suspend non-strategic, loss-making routes / frequencies, close the gap inRenewal ofcommercial plano Narrow the RASK gap to competition with a commercial action plan providingS&MHtransformationo Transform the short and medium haul operation, reducing the CASK gap tocost, fleet and product and keep effective feed for the long haul network2a customer proposition that will ensure ow cost competition, delivering an efficient short and medium haul operationo Negotiate salary adjustments and productivity improvements to close the gapin labour cost and achieve a competitive and flexible cost structure5Restructure noncore businesseso Secure competitive maintenance and handling costs for the airlineo Discontinue non-profitable 3rd party activitiesPlan de FuturoRestructuring context7
«followed by the on-going Plan de FuturoPlan de FuturoRestructuring8
Plan de Futuro will allow Iberia to reach a positive EBIT in 2014 after6 years of losses, as well as the long term objectives set by IAGOperating profit, ¼mHow do weExecutionof goalPlanachieve thisFuturoin adesustainableway?12% RoICPositive2012201320142017-20-166-351Plan de FuturoObjectives9
Plan de Futuro is built around 5 principles comprised of 30 nesses:LWK D QHZ ³VW\OH Plan de FuturoPrinciples10
Plan de Futuro is built around 5 principles comprised of 30 initiatives7RGD\¶V IRFXV Revenue management MarketingSolidrevenuebase New generation selling Digital experience Product Customer experience AncillariesPlan de FuturoRevenue base11
Plan de Futuro is built around 5 principles comprised of 30 initiatives7RGD\¶V IRFXV Labour agreements Fuel savingsSimplicityandflexibility Crews Flight ops. optimisation Ground ops. optimisation Redeliveries Contract leakage Overhead cost reductionPlan de FuturoSimplicity and flexibility12
Plan de Futuro is built around 5 principles comprised of 30 initiatives7RGD\¶V IRFXVSoundcompetitivestance Network optimisation JBAs Fleet Airline MRO relationship Madrid Barajas hubPlan de FuturoCompetitive stance13
Plan de Futuro is built around 5 principles comprised of 30 initiatives ComponentsProfitablecomplementarybusinesses Engines Line maintenance Heavy maintenance Opt. MRO processes HDL productivityPlan de FuturoComplementarybusinesses14
Plan de Futuro is built around 5 principles comprised of 30 initiatives7RGD\¶V IRFXV:LWK D QHZ ³VW\OH Cultural transformation Communication strategy Single data and MIS Future organisationPlan de FuturoStyle15
Before the detail, we want to give you an overview of IberiaPlan de FuturoIberia overview16
Iberia at a glance Revenues 2013: ¼4.8bn ASKs 2013: 52.4bn Employees 2013: 18,103AirlineHandling #1 HDL operator in Spain: 41 airports (incl. MAD &BCN), with 7,000 employees Passenger, Ramp, Operation and Cargo to fit all needsfor our 200 clients #1 airline in Europe LatAm and Spain through theMAD T4 Hub Services include 310,000 aircraft movements and 73mpax Fleet of 32 LH & 41 SH aircraftMaintenance World-leading punctuality with 600 daily flights and100 destinations Iberia Express: LCC feeding and P2P from MAD T4(17 aircraft) Air Nostrum feeding franchise (16 aircraft)Plan de Futuro Top 10 MRO global operator Maintenance and repair services for Line, Aircraft, Enginesand Components Top-notch Industrial premises at MAD and BCN with 7hangars ( 200K sqm) 100 international 3rd-party customersIberia organisationalstructure17
Iberia flies to 101 destinations globally with a major LatAm footprintASKs 2014 (bn)# destinationsEuropeAfrica & Am12Africa & ME5USALatAmPlan de FuturoCapacity breakdown18
Iberia is the reference airline in Spain and the gateway betweenEurope and LatAmLargest airline in MAD with a high presence inWKH 6SDQLVK GRPHVWLF PDUNHW«Flights per day to LatAm1, (#)Capacity from MAD & Spain DomesticASK 2014 (bn)6729%Other1426OtherFR« offering the highest daily flights to B42%VY29%44MAD hubSpain Domestic1 Excludes CaribbeanSource: OAGPlan de FuturoMarket position19
Our customers have a high degree of loyalty and affinity to IberiaConsideration, 1st choice (%)Iberia Plus FFP43Iberia5.8 millionmembersAprox. 30%revenue15Air ir France5easyJet5AmericanAirlines4Source: Brand Tracker Spain (Jan 2014)Plan de FuturoCustomer loyalty20
Iberia has a fleet of 90 aircraft with full commonalityIberia fleet as of December 32116Long-haulPlan de FuturoShort-haulCurrent fleet21
Iberia is taking advantage of the significant opportunities beingpart of IAG bringsWhat does IAG add to Iberia?What does Iberia add to IAG?Financial strength:wRUOG¶V largestairline groups(¼18.7bn revenues)Solid leadershipin the South AtlanticFleet renewalopportunities(459 aircraft)SignificantcooperationopportunitiesUnique upsidepotentialtiEnhanced strategicrelevanceStrongcash contributorto IAGRevenue and costsynergy benefits(¼700m gross EBITimpact)Sharing of costoptimisationbest-practicesPlan de FuturoIAG cooperation22
But above all, the best asset of Iberia is the committed team that ismaking Plan de Futuro a reality (1/2)Management CommitteeCFO J. Sánchez-Prieto CFO at Iberia Express Head of Strategic Planning & Controlling atUralita Director of Strategic Planning at AirNostrumNetwork Planning Director N. Chernoff Senior Manager at IAG Strategy and Operations Director at AAR Corp. Consultant at Bain & Co. Kellogg MBACCO M. Sansavini Chief Strategy Officer at Alitalia Commercial Director Europe at AF-KLM Executive MBA IMDCOO R. Jiménez Hoyos Pilot, previously at Iberia Express, Air Nostrum,Clickair, Spanish Air Force and Vueling both inCrew Training and Operations Quality departmentDirectorsRevMan Director J. Harrison GM Market Planning at Air New Zealand Director Planning at TACA Manager North Atlantic RevMan at KLM/NWA Cornell MBAHead of long-haul RevMan B. Guillén RevMan Director at Avianca Manchester Business School MBAMarketing Director C. Martinoli Product Director at Yell Marketing Director Latin America TPI,Telefónica Group LatAm Marketing Manager ICICustomer Experience Director D. Bountolos Former Madrid Deputy Director at Iberia Transport & Operations consultant at INDRAEuropraxis PDD IESE Business SchoolPlan de FuturoManagement profiles23
But above all, the best asset of Iberia is the committed team that ismaking Plan de Futuro a reality (2/2)Directors (continued)LatAm Sales Director F. Martinez Managing Director France, Royal Caribbean Vice-President Large Market Europe, AMEX Global Corporate Accounts Director & GMVenezuela at Air France ESSEC MBA Sciences Po - Ph.DStrategy Director J.A. Barrionuevo Associate Principal at McKinsey & Company Senior Associate at JPMorgan INSEAD MBAHead of Standards & Procedures J. Elices Pilot & Instructor pilot at Iberia and, previouslyat Air Europa and Spanish Air Force Weaponry Permanent Board member SAFDigital Business Director M.A. Henales CEO of Online Division at Orizonia Corporación UIB MBA INSEAD Strategic Leadership ProgrammeFleet Planning Director A. García-Torres Control & Planning Director at Air Nostrum Industry Affairs Director at Air Nostrum IE MBACEO of Iberia Express F. Candela Planning and Management Control Director atAirNostrum Internal consultant at Nefinsa Uralita Consultant at Andersen ConsultingAlliances Director A. Pimentel President of ACETA (Spanish AirlinesAssociation) Former Sub-Director of Aeropolitical Affairs at IBPlan de FuturoManagement profiles24
AgendaEnsuring the rightLH strategyBoosting ourRASK71TransformingSH business6Focusing on thecustomer2The Iberiaof thefuture35Achieving leanprocesses4Reducing ourcost baseEnhancing theway we sellMarco Sansavini Chief Commercial Officer25
Commercial initiatives included in the Plan de Futuro aim to generatesignificant incremental revenuesRevManAncillariesProductCommercial essNew GenerationSelling26
AgendaEnsuring the rightLH strategyBoosting ourRASK71TransformingSH business6Focusing on thecustomer2The Iberiaof thefuture35Achieving leanprocesses4Reducing ourcost baseEnhancing theway we sellJohn Harrison Revenue Management DirectorBeatriz Guillén Head of Longhaul Rev. Management27
5HYHQXH 0DQDJHPHQW KDG VHYHUDO LVVXHV« Main issuesInadequate and inconsistentRevMan processesMAD-MEX Premium100%Flown load factorResources and organisation50%0%0%Simplistic pricing strategies100%Forecasted load factorMAD-MEX EconomyFlown load factorRevMan forecast accuracy50%100%50%0%Out of data system inputs andparameters0%50%100%Forecasted load factorBoosting our RASKRevMan forecastaccuracy28
5HYHQXH 0DQDJHPHQW KDG VHYHUDO LVVXHV« Main issuesResources and organisationLong-haul economy cabin fare ladder usage(% of total bookings)74%Inadequate and inconsistentRevMan processesRevMan forecast accuracy26%Simplistic pricing strategies9classesOut of data system inputs andparametersStructureBoosting our RASKHistoric pricingstrategies4classesPromo29
5HYHQXH 0DQDJHPHQW KDG VHYHUDO LVVXHV« Main issuesResources and organisationInadequate and inconsistentRevMan processesNew PROS system focuses on more relevantdataO&D significant point-of-sale, FY20135,0004,000O&DsRevMan forecast accuracySimplistic pricing 0050Out of data system inputs andparametersBoosting our RASK60708090100Share of Iberia passengersData inputs andparameters30
«WKDW ZH DUH FXUUHQWO\ DGGUHVVLQJ WKURXJK WKH LPSOHPHQWDWLRQ RI best-practices, with significant upside potentialJoint-effort/coordination7KH UHYHQXH PDQDJHPHQW LQLWLDWLYHV««KDYH D VLJQLILFDQW UHYHQXH XSVLGH Changed 50% of management teamPeoplePricingopportunities Separation between pricing anddemand/inventoryLH mix Develop culture of initiative and risk-takingPeak-J class Rationalise system inputs significant O&D listCorporatePremiumSystems Ensure data integrityEconomy Dedicated support groupSH KPIs and incentive planProcesses Analysis and quantification of actions& policies Standard use of systems across RevManBoosting our RASKRevMan 31
Example: significant increase in LH structure fares usage andpremium cabin revenueActionsLH structure fares usage1H142H14e Improve spread of farelevels among the cabin toensure that Iberia is able togenerate sell up as flightfills up37%26%18%BUEMAD31%23%24% 26%26%MADMEXMADSAOMADSCL37%26%BOGMADLH premium cabin revenue increase (1H14 vs. 2H14e) Introduce new types ofpremium cabin productsand segments to improverevenue and load factor27%14%MADMEXBoosting our RASKLIMMADUsage of LH structurefares10%9%9%MADNYCBOGMADMADRIO32
Ancillaries: complementary flight services to increase cross-sellingand to capture potential revenue, both in B2C and B2B1Revenues YTD2014 vs. 2013 Assigned seatUnbundledcore services2Seating 1st checked baggage Upgrading 165% Charge for booking on holdImproved/customisedflight services Paid access to lounge and/or fast-trackBaggage Comfort seat/exit row 40% Middle-seat free Travel insurance3Cross-sellingservice topassengers Hotel reservationsUpgrading Rental cards Package holidays4Selling servicesto Business 157% Advertising Cash & AviosBoosting our RASK2013Ancillaries overview201433
Examples of ancillaries: selling advertising space and new farefamiliesSelling advertising spaceNew fare families: meeting the expectations andneeds of our customers New strategy for inventory management: First European flag-carrier launching (Sep µ )new fare structure for domestic & Europeanflights, appealing to all market segments Three different fares: offering three different pricesand service levels:í Adding new inventoryí Single inventory management RFP launched for a single seller of alladvertising (print & non-print):BasicClassicFlexibleIncluding onepiece ofluggage and achoice of seatsChanges notpenalised,refund for a feeand priority inboardingí Already selected new provider starting -DQ µ For economymindedcustomerscarrying onlyhand luggage Enlarge our customer base Generate additional revenues byselling additional servicesExpected higher revenues forcommercialising additional mediaopportunitiesBoosting our RASKAncillaries initiatives34
AgendaEnsuring the rightLH strategyBoosting ourRASK71TransformingSH business6Focusing on thecustomer2The Iberiaof thefuture35Achieving leanprocesses4Reducing ourcost baseEnhancing theway we sellCarolina Martinoli Marketing DirectorDimitris Bountolos Customer Experience Director35
QHZ LPDJH«Focusing on thecustomer,EHULD¶V image36
« IRU D QHZ ,EHULD«New look & feelNew liveryA new brand platformDriveAffinityA new way to communicateTalent
« VXEVWDQWLDWHG E\ D UDGLFDO WUDQVIRUPDWLRQ RI RXU SURGXFW DQG services centeredon the needs of our customers and consistent with our revenues and costsNew LH productBrand & communicationCustomerexperienceInnovation & mobilityImprovements implemented under a cost-effective mindset to maintaincost positioning (joint-tenders, service re-design)Focusing on thecustomerAreas of focus38
&XVWRPHUV SHUFHLYH WKH FKDQJH SRVLWLYHO\« Iberia brand perception by dimensionNovember 2013LeadingYoung/vitalYoung/vitalSeptember politanModernHonestSource: Brand tracker Millward BrownFocusing on thecustomerCustomer perception3939
« and the efforts in communication, product and services areincreasing the consideration of the brandCommunication impact on consideration to fly (%)Encourages me verymuch to choose Iberia2424345647Encourages me tochoose Iberia68322334It does not affect meIt is unlikely that Ichoose IberiaI will not fly with e: Brand tracker Millward BrownFocusing on thecustomerCommunicationsimpact40
Brand, product and service transformation is leading to a radicalchange in our customer's perceptionIberia Net Promoter Score1 )HE¶ -2FW¶ (%)18Spend & loyalty161421% make 50%travel with Iberia(vs. 2% ofunsatisfied)12108625pp4Recommendation20-2-4-6Feb Mar Apr May Jun Jul AugSep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 22013x4 recommendation propensityYV ³QHXWUDO customer)20141 Net Promoter Scores measures difference between promoters (9-10 grade) and detractors (0-6 grade)2 Last four weeks average (21/10 11/11)Source: Iberia Customer Experience; BCG market survey to Spanish consumersFocusing on thecustomerNet Promoter Score41
In addition we are introducing profound ³FXVWRPHU experiencemanagement Definition & delivery are our main finition andconsistency inproceduresLoyalty andpersonalisationmultichannelplan6LQJOH , *¶V customerFocusing on thecustomerCustomer experiencemanagement Service standards& customerjourney assuringdelivery in alltouch points Customer centriccompanytransferring thisnew DNA to apersonalisedservice42
New SurveysOld SurveysFocusing on thecustomerSurveys43
Online feedback and employee's recommendationOnline warnings & red flags - newslettersOnline Qualitative & Quantitative of each touch-pointFocusing on thecustomerFeedback channels44
Voice of thecustomer Position: CEO of aSpanish multinationalbased in Houston Status: United & IberiaPlatinum member More than 500 flights inlast 3 yearsFocusing on thecustomerVoice of the customer45
AgendaEnsuring the rightLH strategyBoosting ourRASK71TransformingSH business6Focusing on thecustomer2The Iberiaof thefuture35Achieving leanprocesses4Reducing ourcost baseEnhancing theway we sellMiguel Henales e-Business DirectorFrédéric Martínez LatAm Sales Director46
%RRVWLQJ RXU GLJLWDO FKDQQHO LV RQH RI WKH SLOODUV RI ,EHULD¶V VDOHV transformationMain distribution channelsLeisure travelagenciesTravelmanagementcompaniesOnline travelagenciesDigital platforms Iberia.comEnhancing the way wesellDistribution channels47
Digitising Iberia - digital channel as the main route to building salesand customer relationshipsObjectivesImproveuserexperience Multi-channelHow Cover all customer journey Imbue the company with digital DNA Customer intimacy Increase traffic Enhanceconversion Facilitate mobilityDevelopdigitalchannel Boost influence of digital channel New revenue streams Promoteengagement Offer ancillaries Customisation Generate savingsEnhancing the way wesellDigitising Iberia48
Executive MBA IMD Network Planning Director N. Chernoff Senior Manager at IAG Strategy and Operations Director at AAR Corp. Consultant at Bain & Co. Kellogg MBA COO R. Jiménez Hoyos Pilot, previously at Iberia Express, Air Nostrum, Clickair, Spanish Air Force and Vueling both in Crew Training and Operations Quality department
