LONDON – Ahead of the news surrounding International Airlines Group CEO Luis Gallego, we pose the following question: Should he get a payrise?
Gallego is expected to meet with shareholders next week due to a vote being placed against him which would sanction the ability for him to boost his pay to £4.6m from £1.1m if he meets targets in 2022.
Amendments to his share awards incentive program would see it increase by 150% if approved.
So, we ask the question, should he get a pay rise? And another question will be, how do we determine this? To answer this, we will split the conglomerate into separate entities, being the airlines that fall under the group being:
- British Airways
- Iberia
- Aer Lingus
- Vueling
From there, we will use 2021’s numbers to acquire an establishment of performance. We will talk about COVID after we have dissected each carrier. Without further ado, let’s get into it:
IAG’s Carriers…
British Airways…
British Airways recorded a operating loss before exceptional items of £1.9bn in 2021, which in turn has been attributed to the COVID-19 pandemic.
BA has had a negative reputation throughout the COVID-19 pandemic for cutting a significant number of jobs, and the way they went about it.
On top of this, the negotiation for pay rates has had the airline battling with unions for some time now, with their recruitment processes being exacerbated due to overcapacity in the Summer 2022 scheduling as well.
2021’s loss is the largest recorded out of the whole of the IAG brand.
Iberia…
Iberia posted a loss of 234 million EUR for the full-year 2021, which is not as much as British Airways had recorded.
The Spanish carrier has had typically less issues than British Airways to contend with, and has so far in this year been doing well to restore services back to pre-pandemic levels.
Looking ahead, the airline may receive some of the 737 MAXs that IAG firmed up on earlier this year, but all this is yet to be confirmed in the coming months and years ahead.
Aer Lingus…
Aer Lingus posted a loss of 347 million EUR for the full-year 2021, but there is expectation that the airline will be able to turn this around sufficiently.
The Irish carrier has bolstered up capacity through the opening of its UK Air Operator’s Certificate and operating flights from Manchester, which has been largely welcomed by consumers.
Utilising the Airbus A321LRs in the fleet have been very beneficial for the carrier, and will no doubt continue to do so over the coming years with lower overheads compared to its larger A330s.
Vueling…
Vueling posted a loss of 262 million EUR for the full-year 2021.
The airline has been relatively quiet when it comes to staff cuts and other things, but has been particularly vocal when it comes to new route openings.
Some feats even from this year consists of strengthening its London Gatwick operations with more routes, as well as supporting Liverpool Football Club transport passengers over to Paris for the Champions League Final.
The COVID Perspective…
Now, in order to make this a more-rounded analysis piece, rather than an attack ad on Gallego, it is key to note the COVID-19 perspective in all of this.
Gallego has been CEO of IAG since September 2020, replacing Willie Walsh who went to head up the International Air Transport Association (IATA).
A lot of the damage to the IAG brand was done during the reign of Walsh. A lot of critics may say: Well what about Alex Cruz?
Cruz, of course would have taken decisions that would have placed a detriment towards IAG, and more notably British Airways, but the buck would of course stop with Walsh at that time.
Gallego hasn’t been in the role long enough, and hasn’t had any drama-free years in his role as CEO of IAG, to properly assess whether he should get a payrise or not.
The Stigma Surrounding Payrises…
There is of course a stigma surrounding payrises for Chief Executive Officers in any role, not just in aviation.
In the argument of COVID, there is always the suggestion that pay cuts should have happened to fund the companies, rather than laying off staff.
Gallego did in fact cut his salary, which was mentioned at the beginning of this article. Whilst it still was a cool £1.1m, there are of course critics who say that this should have been cut further.
Such a stigma has been increased in the perspective of Gallego because of what was reported by The Mail on Sunday.
It was reported that Gallego had been given a “pot” of £500,000 to help pay for his two homes, with there being one in Spain and one in the UK.
Now, any normal person would suggest that he doesn’t need a second home and that he doesn’t need £500,000 to help maintain it. Where the source of the £500,000 comes from is obviously the next question that needs to be answered.
Should Gallego Get A Payrise Now That The Worst Is Over?…
Overall, it is a difficult question to answer, as it is such a multi-faceted thing to tackle.
IAG, like with any other airline group, hasn’t done particularly well due to the COVID-19 pandemic, BREXIT, and now the Ukraine Crisis. It is probably of argument that if Gallego does hit his targets and pleases shareholders, then he is entitled to that bonus.
After all, working a job as a CEO is not something that is easy. In the case of Gallego, you are running a multi-billion dollar airline conglomerate, so it can’t be an easy feat, regardless where there are CEOs regionally or not.
It ultimately comes down to seeing the 2022 full-year reports, which will come out next year, before a proper answer can be given into whether Gallego is worth his money or not.
