Iberia (airline)

Iberia, Compañía Aérea de Transportes was incorporated on 28 June 1927 with a capital investment by the financier Horacio Echevarrieta and Deutsche Luft Hansa of 1.1 million pesetas. Flight operations started on 14 December 1927.[12] Within a year, the company was sponsored by the Spanish government to provide postal transport between Madrid and Barcelona. During the dictatorship of Miguel Primo de Rivera, the aviation companies in Spain were combined and became state-controlled as a general interest public utility, coming into effect in early 1928.[13] As a consequence, Iberia was merged into Compañía de Líneas Aéreas Subvencionadas S.A. (CLASSA) and ceased activities as an independent airline on 29 May 1929.[14] The name "Iberia" continued to be registered although the company airline did not have a fleet or commercial operation under its own brand.[13]

In 1937, during the Spanish Civil War, Spanish Navy captain and Director-General of the company Daniel de Araoz y Aréjula[15] received the order from General Kindelán to organize an airline for the air transport in nationalist-held territory during the course of the war.[13] Daniel de Araoz y Aréjula traveled to Germany to get support and material for the restoration of the company as independent airline, thus six Junkers Ju 52 from Deutsche Luft Hansa arrived, which were acquired by Iberia at the end of the conflict, in addition to material to help the operations.[13] As the name "Iberia" was still registered, it was used when operations began in 1937[16] towards the end of the war.[17] During the conflict Iberia was a purely domestic airline, with headquarters in Salamanca the airline operated flights to cities in the nationalist side, Spanish North Africa, Spanish West Africa and Morocco.[18] After the war, at the end of the 1930s, the airline served the Seville–Larache–Cabo Juby–Las Palmas, Barcelona–Saragosa–Burgos–Salamanca–Seville–Tetuan and Palma–Barcelona–Vitoria runs using Junkers Ju 52 aircraft.[19] On 1 May 1939, Iberia operated its first regular service to an international destination as an independent civil airline with a flight Madrid-Lisbon.[20]

In 1940, the government gave the monopoly of national air transport to Iberia (this fact changed 6 years later when the government liberalized the national air traffic for the private airlines),[21] this privilege helped the company to start building as an important international airline, which had not been until then.[22] The airline was nationalised on 30 September 1944 and became part of Instituto Nacional de Industria. The policy of the company was to separate itself from the German orbit to which it had been linked in its first years, and establish relations with the United States in terms of aircraft purchase and supplies of aeronautical material for the operation.[22] Thus that year the purchase of seven DC-3 and three DC-4 was finalized, with the purpose of expanding the network in Europe and accomplishing the company's first transatlantic flight.[22] This was achieved in 1946, Iberia was the first airline to fly between Europe and South America after World War II, using a Douglas DC-4 to operate flights between Madrid and Buenos Aires.[7] This flight was the first of an expansion of flights between Latin America and Europe through Spain carried out by the company, with destinations like San Juan de Puerto Rico, Caracas, Ciudad de México and La Habana. The bad diplomatic relations of the francoist regime delayed some destinations until the beginning of the 50s.[22]

Iberia incorporated four more DC-4s to its fleet during the first half of 1950, enabling both the strengthening of current services and the launch of new ones.[23] With the Pact of Madrid in 1953, visa requirements were eliminated for US visitors to Spain.[24] This stimulated the start of transatlantic flights between Spain and United States the following year. The airline phased in the first of three Super Constellations in June 1954. The aircraft was named Santa María to commemorate Columbus' first voyage[25] and was deployed in the inauguration of the new Madrid–New York service two months later, on 3 August 1954 (1954-08-03), the same day that Columbus left the port of Palos de la Frontera.[26][27] The amendments to Article 6 of the Convention on International Civil Aviation of 14 June 1954 made in Paris on 30 June 1956 about non-scheduled air services enabled mass tourism using chartered aircraft since allowing European member states to carry out this type of operation with international flights between their territories.[28] This favored the airline given that it had in its territory several highly sought after destinations, mainly those on the eastern and southern Mediterranean coast and in the Balearic and Canary Islands, highly demanded by seaside tourism which began with this type of operation.

In 1959, the Spanish airline Aviaco became a part of Iberia by controlling two thirds of its capital in a capital increase.[29] Aviaco had been created in 1948,[30] after the national air traffic had been liberalized for Spanish private companies in 1946.[21]

In 1961, Iberia had 9 Super Constellation in the fleet, that year came into service the first DC-8-50, the four-engined jet airliner was progressively incorporating until reaching the number of 8 aircraft of the 50 series variant.[31] Iberia was gradually incorporating jets of short and middle range, such as Sud Aviation Caravelle, and Douglas DC-9. The Super Constellations were removed and sold in 1966 and, two years later, three DC-8-63 with more seat capacity were incorporated into the fleet. By 1969, the long range fleet of Iberia was composed by 11 DC-8.[31] In the early 1970s the jumbo jets Boeing 747s and Douglas DC-10s came to the company during an expansion of the intercontinental routes, specially to Central America. By the middle of this decade the airline flew to almost all Latin American capitals. With the expansion in Latin America the company had followed a policy of purchasing shares and establishing agreements with several Latin American airlines such as Compañia Dominicana de Aviación, Aérolíneas Peruanas, PLUNA and Air Panamá Internacional. At first, the intention of this policy could be to create a strong distribution network for intercontinental routes passengers, but as the airline was controlled by the state the Franco regime used this investment policy to get support in Latin America. Iberia gave material, capital and logistical support to those flag-carrier airlines. By 1971, these investments resulted in the loss of 14 million dollars.[32] Iberia also bought the short-middle range trijet Boeing 727-200 in 1971, of which the company had 35 aircraft[33] and was used until 2001 like the other short range jet bought by the company in the late 60's, the Douglas DC-9.[34]

In 1987, Iberia, together with Lufthansa, Air France and SAS Group, founded Amadeus, an IT company (also known as a Global Distribution System) that would enable travel agencies to sell the founders' and other airlines' products from a single system.[35]

This year Iberia planned a fleet renewal in the middle range fleet with the McDonnell Douglas MD-87 and Airbus A320 replacing the Douglas DC-9 and Boeing 727 respectively.[36] In June 1990, the carrier bought 16 Boeing 757s for US$1 billion, including spares and training; twelve more aircraft of the type were taken on option as a part of the deal.[37]

In the 90's, Iberia followed a policy of buying shares of Latin American flag carriers. Its intention was to control the entire Latin American market and become one of the largest airlines on the worldwide scene.[38]

The investments started in June 1990 with the buy of a 30% stake in Aerolineas Argentinas.[38] In 1991 Iberia bought a 45% stake in Viasa for $81million[39] and a 35% stake in Chilean Ladeco[40] The airline continued making progress in setting up Europe's first international airline frequent-flyer programme in 1991, with the creation of Iberia Plus.

In 1994, the bad results of Aerolineas Argentinas, which presented a positive balance in its commercial exploitation but nevertheless hid a significant deficit with losses in non-operating activities, led Iberia to increase its ownership participation to 85%.[41] With this increase in participation, the Argentine state renounced its "golden share", allowing Iberia to have full fiscal control of the company. Iberia began a reduction in the size of the company, a liquidation of the national and overseas offices, and the technical sale of its entire fleet composed of 28 aircraft in a "sale and lease back" operation.[41] Argentine sources indicates that the purchase capital of Aerolíneas Argentinas was charged to its own financial liability.[42] This, together with the aforementioned sales, generated a big controversy, giving rise to criticism of the Argentine government for the privatization of the company. The truth is that during the period that Aerolíneas Argentinas was owned by Iberia (1990–1995), the Spanish airline allocated more than 1200 million dollars in the Argentine flag carrier and kept the airline operating despite the poor results.[41] Meanwhile, the Argentine government refused to invest more capital and expressed its desire to get rid of a large part of its shares.[38] Iberia carried out major reforms in the structure of the company, which by that date was outdated with, among other things, extortionate personnel costs.[43] Some of these changes included the development of a free booking program, the complete computerization of the management system, the introduction of business class on domestic flights, and the creation of a new hub in Ezeiza International Airport for long range regional flights to Latin American destinations.[41] In 1995, before the process of privatization of Iberia, Aerolineas Argentinas was transferred to the Spanish government through INI, which would later become SEPI. In 2001, the Argentine flag carrier was sold to the Spanish company Grupo Marsans.[44]

In 2008, the president of Argentina Cristina Fernández de Kirchner expropriated the company to Grupo Marsans with the symbolic pay of 1 argentine peso ($0.57) and renationalized the airline.[45] In July 2017 the ICSID condemned Argentina to pay 320 million dollars to Grupo Marsans for having paid a lower price than the real value of the company.[46] On 7 April 2010, the president of the Spanish Court of Auditors presented at the Spanish Parliament the figures of the investment in Aerolíneas Argentinas between 1990 and 2001, which was estimated at €2100 million.[47]

The plans to make the Iberia group the dominant airline in the Latin American market also failed in Venezuela. In 1997 the board of directors of Viasa, in which Iberia was the majority, decided to suspend the flights of the company, arguing that the situation was unfeasible.[48] Iberia announcing that the company was not going to continue providing more capital into Viasa if its local partner, the Venezuelan state-owned group FIV, was not going to do the same. By then Iberia had invested more than 250 million dollars in the Venezuelan flag carrier without having any profit.[48] In February 1997, the agreement for the liquidation of Viasa that accumulated a 200 million dollars debt, with a capital of only 2 million dollars, was announced. Iberia and the Venezuelan government had the intention of liquidating the company to avoid bankruptcy. Iberia offered to write off the 150 million dollar debt that Viasa had accumulated to the Spanish carrier in exchange for keeping its fleet of four DC-10s and five Boeing 727s. The agreement included compensation for the staff after the liquidation, which had a cost of 20 million dollars.[49]

Regarding Ladeco, Iberia was a minority shareholder (35%) and did not intervene in its management. Initially Iberia had the intention of achieving the merger of Ladeco with Lan Chile, but Chilean antitrust laws prevented it.[50] Later, in 1995, Lan Chile made a major acquisition of Ladeco shares and acquired 57.6% of the company, this operation was approved by the Chilean antitrust prosecution,[51] and then began a merger process in which Iberia losses some rights acquired during its time as shareholder of Ladeco. In 1997, Iberia sold its shares in Ladeco after had made a $22 million investment.[52]

In 1996, the airline launched its website.[53]

The company ordered 76 aircraft from Airbus in February 1998, which at the time was the largest single Airbus order. The following year it bought Aviaco and inherited that airline's fleet.[54]

By the end of the 90's, Iberia owned as majority shareholder the Spanish airlines Aviaco, Viva Air, Binter Canarias and Binter Mediterráneo, and Latin American airlines Aerolíneas Argentinas, Austral, Viasa and Ladeco.[55]

During 2001, Iberia was privatised and shares were listed on stock exchanges. By 2002, when Iberia celebrated its 75th anniversary, it had carried nearly 500 million people in its history.[56] In July 2004, Iberia announced it had decided to move its Latin American hub from Miami, Florida to San Pedro Sula, Honduras.

On 5 February 2006, Terminal 4 at Madrid - Barajas Airport was turned over to Iberia and fellow Oneworld alliance members. This provided much-needed expansion capabilities for Iberia. Iberia represents around 60% of the airport's traffic. In 2005, the airline and its regional branch Air Nostrum transported 21,619,041 passengers via Madrid – Barajas Airport.

Iberia partially owns a low-cost carrier called Clickair, launched in November 2006.

On 12 November 2009, Iberia confirmed that it had reached a preliminary agreement to merge with British Airways.[57] The merger between the two carriers would create the world's third-largest airline in terms of revenue.[58] On 8 April 2010, it was confirmed that British Airways and Iberia had agreed to a merger, forming the International Airlines Group, although each airline would continue to operate under its current brand.[59]

In November 2012, Iberia announced plans to reduce the number of employees by 4,500 and its fleet by five long-haul and 20 short-haul aircraft.[60]

In 2012, Iberia established its own low-cost airline Iberia Express, which operates short- and medium-haul routes from its parent airline's Madrid hub, providing feeder flights onto Iberia's long-haul network. The airline began operating on 25 March 2012 and shares its head office with Iberia in Chamartín, Madrid.[61] In 2013, the headquarters of both airlines were moved to a new offices in Ciudad Lineal, Madrid, and the corporate images have been changed as part of the renewal process.[62]

The company head office is in the inmobiliaria Colonial in the MV49 Business Park in Madrid.[63][64][65] This facility is in proximity to the intersection of the Autopista de Circunvalación M-30 and Avenida de América. In 2013 the company moved its head office from the former Campos Velázquez,[63] in the Salamanca district of Madrid,[66] to save money.[63]

On 3 April 2001, Iberia was privatised and included in the IBEX-35 stock index of the Madrid stock exchange. The core shareholders were: Caja Madrid– 23.45%, British Airways 13.2%, SEPI– 5.20%, El Corte Inglés– 2.90%.[67] British Airways raised its stake in Iberia by purchasing American Airlines' remaining shares, reportedly paying £13m for the small shareholding. This increased BA's total stake in Iberia to around 10% and preserved its two seats on the Iberia board.[68]

In July 2008, British Airways and Iberia announced plans to merge, wherein each airline would retain its original brand.[69] The agreement was confirmed in April 2010,[70] and in July, the European Commission and United States Department of Transportation permitted the merger and the two airlines began to co-ordinate transatlantic routes with American Airlines.[71][72] On 6 October 2010, the alliance between British Airways, American Airlines and Iberia formally began operations. At the time it was estimated the alliance would generate an estimated £230 million in annual cost-saving for BA, in addition to the £330 million which would be saved by the merger with Iberia.[73] The merger was finalised on 21 January 2011, resulting in the International Airlines Group (IAG), the world's third-largest airline in terms of annual revenue and the second-largest airline group in Europe.[70][74]

Prior to merging, British Airways owned a 13.5% stake in Iberia, and thus received ownership of 55% of the combined International Airlines Group; Iberia's other shareholders received the remaining 45%.[75]

The merger has been controversial. British Airways operates two funded principal defined benefit pension schemes in the UK. British Airways admits that one of the most serious financial risks it suffers is the challenging pension schemes' combined deficit. The last actuarial valuation was 3.7bn pounds, a value even greater than IAG's capitalisation. In addition and according to the "Pensions Act" for the year 2004, should it be necessary, the United Kingdom's Pension Regulator could force Iberia or IAG to give additional financial support to British Airways' retirement pension schemes. In its "Annual Report and Accounts Year ended 31 December 2011" BA declared that "negative movements in pension asset values and financial returns from these assets may increase the size of the pension deficit".[76]

As of December 2013, the airline had over 18,000 employees.[77]

Due to Brexit, Iberia has been forced to prove that it is still a Spanish airline, despite being merged with British Airways. The consequence for not doing so is their potential inability to fly within the European Union.[78]

Iberia has a 9.49% stake in low-cost carrier Vueling which is based near Barcelona, with parent company IAG owning the remaining 90.51%. This was done to ensure that IAG does not have 100% of the shares in Vueling, but that the shares are split between its divisions. Iberia also has a 0.95% share in Royal Air Maroc.[7]

Iberia is allied with American Airlines, Qantas, Avianca and British Airways, and it was allied with Grupo TACA. On 1 September 1999, the company joined the Oneworld alliance.[79]

Iberia formerly owned Aviaco, which operated most domestic routes. It was founded on 18 February 1948 and operated until 1 September 1999. Iberia also owned Binter Canarias, until the Spanish government began the privatisation of the subsidiary. Hesperia Inversiones Aéreas bought the airline from Iberia in July 2002. A second airline using the Binter name, Binter Mediterraneo, was formed as a subsidiary of Iberia in 1988 with routes from Melilla to Málaga, Almeria, Valencia and in its last year, with Madrid.[80] The airline was acquired by Air Nostrum in 1998 and merged into its operations, at that time the airline had a fleet of CN- 235.[81]

Iberia was a founding partner in the computerised air ticket reservation system, Amadeus, with an 18.28% stake .[82] Iberia is also active as a tour operator through its Viva Tours[83] and Tiempo Libre units,[84] and with Cacesa, it supplies parcel shipment services.[85]

In addition, Iberia is an aircraft maintenance company, servicing its fleet and those of another 48 companies, including some leading European airlines.[86] Iberia is a supplier of aircraft handling services at all Spanish airports and two in Equatorial Guinea; its airline clients number more than 200 and has 7300 employees.[87]

As of September 2018, Iberia had codeshare agreements with the following airlines:[88]

An Iberia Airbus A320neo

An Iberia Airbus A330-300

An Iberia Airbus A350-900

As of February 2020, the airline's fleet consists of the following aircraft:[90]

At the 2019 Paris Air Show, IAG agreed to purchase 14 Airbus A321XLR aircraft, 8 for delivery to Iberia and 6 to Aer Lingus, with options for a further 14 of the aircraft.[95]

A former Iberia McDonnell Douglas DC-9

A former Iberia Boeing 757-200

Over the years, Iberia operated the following aircraft types:[96][97]