Last week three significant aviation companies provided updates to the stock market on their financial performance.
Each of them serves major but quite different markets but all three have an interesting common denominator — they have undertaken radical changes in strategy from positions of strength to drive shareholder value.
The companies concerned — IAG, AerCap and Ryanair — offer remarkable insights to the challenges and opportunities that exist in the global aviation industry. Each company is a huge enterprises in their respective markets and face fierce competitors. Yet, each is thriving after a series of strategic decisions that have fundamentally altered their business trajectory.
IAG will be best known to most through the brands of its subsidiary airlines — Iberia, British Airways and Vueling.
International Airlines Group itself was created in 2011 to facilitate the merging of different airlines in a consolidating global marketplace. Led by Willie Walsh, IAG has aggressively restructured a bloated cost base within Iberia, marshalled profitable growth at British Airways and developed a low cost airline around the Vueling brand. After some ferocious early resistance to change, both Iberia and British Airways are now enjoying growth and with it, a commitment to a new fleet.
Ryanair’s journey over the past year is well rehearsed as it shifted towards a more customer friendly tack, something considered revolutionary when considered next to the airline’s prior approach. It would not have been a surprise to hear its CEO was carried shoulder high by four gold painted cherubs last week in the City of London as the company posted record profits and sharply raised its full year guidance.
Students of business management should note that the Ryanair transformation took place despite recording industry high margins during 2013 and the changes were orchestrated by its existing CEO. Future MBAs will be written on that one.
The last company in this trio is the lessor AerCap which is low profile among consumers but high profile among aircraft investors. AerCap engineered a remarkable deal late in 2013 that catapulted it to the top position in global aircraft leasing. It now has a fleet of no less than 1285 aircraft and they have an order book for another 391 jets.
There are two worthwhile observations about these three companies;
* Each is led by an Irish CEO, and;
* All three have taken radical actions within their business to help create further value for their shareholders.
That theme was taken up by the CEO of the food company Aryzta last week. He opined that regular radical changes were needed inside a company to ensure they remain relevant to customers and consumers. Aryzta opted for series of acquisitions that ensured its reliance on convenience stores was not over indexed as consumers sought value in the aftermath of the global financial crisis during 2008.
Well managed companies do not wait for a crisis to unfold before them but instead anticipate and address the obstacles that stand in the way of further success. The decision to make fundamental change while everything is relatively stable can be a difficult conversation with a board, shareholders or with management colleagues but this is what CEOs are there for — to make tough calls at critical points in a company’s life.
After the crisis of 2008 it became fashionable in certain quarters to suggest that the Irish had trouble looking after their own affairs.
Now, not only is it clear our economic implosion was correlated with massive malfunctions among global central banks and regulators, but it is evident too that the talent to lead fast moving international companies successfully exists very close to home.
Joe Gill is director of corporate broking with Goodbody Stockbrokers. His views are personal.
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