IAG boss stops eyeing Europe for acquisitions

EUROPEAN airlines will have to cut costs at existing short-haul businesses to compete with budget airlines or struggle to stay aloft, IAG boss Willie Walsh said yesterday, adding that his firm is not looking for further acquisitions in Europe.

So-called legacy carriers such as IAG, Lufthansa and Air France-KLM are cutting jobs, renegotiating staff contracts and dropping uncompetitive routes to get costs on a par with budget carriers, such as market leaders Ryanair and EasyJet.

They are also replacing older, fuel-thirsty planes and streamlining back-office operations.

“We don’t see anything attractive to buy or merge with in Europe at the moment. We’re focused on reducing out cost base and making our short-haul business more efficient ... those that don’t will struggle to survive,” Walsh said. “We have Vueling and I think every airline should aim to have an independent low cost arm.”

In current cut-throat market conditions, even some of the budget airlines are finding it tough. Ryanair earlier this month warned it could miss its annual profit target.

British Airways previously tried to run a low-cost airline, Go, alongside its mainline carrier but sold it to private equity group 3i in 2001.

“There was a lot of management interference in Go and it started cannibalising BA to some extent so we have left Vueling as a separate, independent airline,” said Walsh.