Originally Posted by
dylanks
I guess my impression was that they present them as running somewhat independently, but the skeptic in me doesn't 100% believe that's the case.
I know IAG has been working to standardise the shorthaul aircraft configuration (not in a good way for passengers). I understand the concepts of customer segmentation and product differentiation. But for the supposedly more valued customer (people who typically fly in business and first class and frequently), why not make it simpler for such travelers to get benefits whenever buying service from an IAG carrier? The main argument has been made that the cost to implement outweighs the benefit to IAG. Any other reasons that I'm missing?
On the first bit - running independently - when you've got separate P&Ls and separate management teams - that's independent enough. Sure - coordinate when necessary and where beneficial - but why introduce costs you don't have to - e.g. why give lounge access on Level when the business is about being as low cost as possible.
And to then move that onto the second point - you say you understand the concepts around customer segmentation but then go on to ignore it.
IAG thinks of it like this:
The valuable customer - the one who wants business class - can buy our Iberia product or our BA product.
The customer who wants a bit of value but isn't prepared to pay for business can fly BA, Aer Lingus or Iberia economy
The customer who wants the cheapest flights can do Vueling and Level.
So why would Vueling and Level care about the customers in group 1? And if we then take it up to a group level - why would IAG look to cannibalize BA and Iberia's income by providing benefits on Level and Vueling it doesn't need to? The reality is that if Vueling and Level offered fares at BA's height - they wouldn't compete where they need to (against EZ and FR) - so by making those offerings - they'd simply increase the low cost airline's costs while not significantly impacting revenue (because the individual would be buying a low cost fare) while at the same time removing potential income from one of the other brands who would have otherwise taken the fare.
The reality is that the low cost flyer, in the majority of cases, is going to be swayed by a £1 difference in fare, not 250 avios. And the frequent flyer who would otherwise book BA to get lounge access or whatever, wants to be able to have lounge access on Vueling/Level because they don't want to pay BA's fares. But it's the fare level that enables the lounge access.
IAG aren't looking to create an internal alliance - they are looking to have a suite of successful airlines - each with it's own market, it's own competitive message and it's own strategy - and, in additional, IAG wants a successful loyalty currency.