LEVEL Goes Short-Haul From Vienna, and I Struggle to Figure Out Why

When IAG launched LEVEL last year as a long-haul, low-cost airline, I understood the niche. But now, LEVEL is growing and not in ways you’d expect. The airline will open its first short-haul base of operations in Vienna from July 17, and I can’t understand why. I talked to a lot of people around the industry, and there are plenty of theories. There is, however, only one that makes sense to me: LEVEL is being used as the enforcer wherever IAG needs a little muscle.

IAG owns several different airlines, but there was a gap in its portfolio until LEVEL came along. British Airways and Iberia formed the core of the group as the traditional network airlines. Then Vueling was bought to be a short-haul, low-cost carrier. Finally, Aer Lingus came in as sort of a hybrid lower-cost network airline. But what IAG lacked was a vehicle it felt it needed to compete in the pure long-haul, low-cost space. Enter, LEVEL.

In an interview with IAG chief Willie Walsh, I started to get the impression that LEVEL was a key piece of the puzzle from a competitive standpoint. LEVEL would be able to fly long-haul flights from places that IAG could not defend — or in some cases enter in the first place — with existing carriers. Barcelona is a perfect example of a place that Iberia has virtually abandoned compared to what it used to have. It is also the main base for Vueling, so Willie explained that the airline could feed off of Vueling’s short-haul network to make long-haul from Barcelona viable again for the group.

I’m always skeptical about these kinds of branding games, but this was different than something like Air France’s absurd Joon. It looked like LEVEL’s brand was dreamed up in about 5 minutes and the implementation took no longer. The brand was an afterthought to the strategy of trying to take on Norwegian and others head-to-head without bleeding too badly. (We can argue whether that’s a strategy worth pursuing or not some other time….)

Since launch, LEVEL has expanded slowly. Open Skies, an orphan subsidiary of British Airways that was flying from Paris to the US, was retired in favor of LEVEL’s low fare focus. That in addition to Barcelona has been the extent of LEVEL’s presence until now.

Now, IAG is unleashing LEVEL on Austria. The airline will fly from Vienna to Alicante, Barcelona, Bilbao, Dubrovnik, Ibiza, Larnaca, London/Gatwick, Malaga, Milan/Malpensa, Olbia, Palma Mallorca, Paris/CDG, Valencia, and Venice in the beginning. It’s doing this with a new operating subsidiary called Anisec which is based in Austria and has a new certificate. Anisec will start with four A321s that used to fly for airberlin and its subsidiaries.

In the beginning, LEVEL isn’t even selling its own tickets. You have to go to Vueling’s website to book. And Vueling itself flies to Vienna already on some of the exact same routes (Barcelona, Palma Mallorca, and Paris/CDG) in addition to Rome. The obvious question here is… why? Why isn’t this Vienna operation going under the Vueling name?

It seems like the far more rational thing to do would be to use the Vueling name. Vueling has been the low-cost, short-haul operator for IAG. It’s already in Vienna and there’s no reason that it couldn’t expand there. LEVEL is using A321s, and Vueling already flies those. Sure, the configuration is somewhat different since these were outfitted for airberlin and haven’t been changed, but that shouldn’t matter. The onboard offering appears to be pretty much the same at this point. Engine type doesn’t matter either since Vueling operates both CFM and IAE on its fleet.

I asked IAG specifically why LEVEL was doing this, and the response was typically coy.

We feel that the LEVEL brand is well suited to the local market

Right, whatever that means.

I’ve seen speculation out there that Vueling’s brand is so tarnished that IAG wanted to use something new to get away from that. I don’t buy that for a second. IAG isn’t one to care about brands all that much, but if Vueling was truly a problem, then it would likely work on a broader solution. When I interviewed Willie previously, he did indicate that they “did brand research in a number of countries, and [Vueling] wasn’t as strong in the US as we would have hoped. So I think having looked at it quite a lot, a number of issues pointed us to creating a new brand.” But then he added “We want to keep these companies focused on their core activities. Vueling’s core activity is short-haul low-cost.” LEVEL doesn’t seem to be following that strategy.

Some have suggested looking down in the weeds. Are there countries that don’t have open skies agreements with the EU where an Austrian airline would fare better than a Spanish one? Considering we’re talking about short-haul flying here, then it’s really Russia that stands out. Russia still has individual bilateral agreements with countries within the EU, but I know in the past, it hasn’t cared about where the certificate was located. It cared about the ownership’s location when determining which agreements applied. Further, even if that wasn’t the case, then Anisec could have flown under the Vueling brand instead of LEVEL. Lastly, does Russia really matter all that much? I doubt it.

Some suggested there could be a cost-related issue here. Is it somehow cheaper or more flexible to operate in Austria? If so, I still don’t know why it couldn’t have just had Anisec fly as Vueling Austria, but I don’t get the feeling that’s the case anyway. And when I asked IAG about unions, they told me they were “in touch with the unions and are actively working with them to reach agreements.”

So then… what is it?! I think my favorite theory is this. Vueling is a real airline that makes decisions based on profitability. LEVEL is not. It’s an enforcer that’s meant to fight competition as needed regardless of commercial results.

You may recall that IAG tried to buy Niki, one of the spin-offs in the airberlin death spiral. It actually had a deal, but then there was a spat over which jurisdiction was in charge of the unwinding. IAG lost that battle and lost Niki. Niki Lauda himself bought the airline back, turned it into LaudaMotion, and sold a piece to Ryanair. Now, IAG is mad, so it’s sending out the enforcer to do some damage. This is an experiment for Ryanair to get involved in Austria, and IAG likely wants to make sure it’s not a successful experiment. LEVEL will put pressure on that.

Is this right? I have no idea. But it’s the best theory I’ve heard yet. If it is, then it’s hard to imagine how this really makes sense in the long run. But maybe the picture will become more clear somewhere down the road.

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dfr
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dfr

I disagree with you re Brands. IAG doesn’t think Vueling is transferable around the EU.

Bgriff
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When you said enforcer early in the article, I assumed you meant that Level was an enforcer to keep Vueling’s unions from getting too greedy, and otherwise putting pressure on other internal parts of IAG? That only works if Level itself stays efficient, but it might work for a while.

Chase
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Chase

I think plain and simple, it’s Vueling’s name, not it’s brand, that gave IAG pause to consider expanding it. I’ve personally asked people “have you checked how much a Vueling flight would cost” and the response was always, who, how do you pronounce that, how is that spelled? I think IAG did not do enough to promote Vueling’s name recognition to that of something like Lufthansa or Aeroflot, for example. That’s why Level is such a simple, if not boring, name.

grichard
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grichard

Not sure I’ve ever heard it pronounced. I just assumed it was “view-ling”. Yes? No?

Sean S.
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As others have pointed out, LEVEL is in and of itself a better understood and potentially long-term better “brand” than Vueling outside of Spain. Moreover I suspect part of this has to do with Brexit plans to have a wider array of operating certificates to be able to take up flying in the event of a hard Brexit that resorts back to old school bilateral treaties.

Konstantin
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Konstantin

There were some issues with Vueling’s pilots lately, and IAG probably can’t operate with the Anisec AOC under the Vueling brand. (Level doesn’t have an own AOC, so it’s no problem.) This, combined with the lower crew cost of Anisec and the mentioned traffic right advantages of an Austrian AOC probably led to that decision.

Alex Kim
Member
Alex Kim

I think it is actually Wizz that has been actively expanding in Vienna recently .. maybe they are coming after them ?