Spain and Portugal for Visitors

Posted by : John Ross on Oct 11, 2007 - 10:13 AM airtravel

Looks like I was precipitate on this story, as Vueling's current managers Muñoz and Ros are still in control of the company, pending an upcoming shareholder's meeting. But this is what I wrote:

Control of Spain's low-cost airline Vueling is being taken over by José Manuel Lara, president and largest shareholder of the massive Spanish publishiing empire, the Planeta Group. Why should you care? Well, in recent years, Vueling's internal routes have provided an interesting alternative for long and medium-distance journeys within Spain and Portugal, but the company has been through a crisis of profitability and, especially, investor confidence. Now Lara's investment company, Inversiones Hemisferio, has increased its participation in Vueling from under 16% to nearly 29% ensuring control, although Lara himself had resigned from the company's Board of Directors only a few days before, following the exit of other key shareholders. More about high-flying finance here.

Vueling's name is a kind of wordplay, 'vuelo' being the Spanish word for 'flight' and the '-ing' being added as a wink in recognition of the Spanish fashion for adding the suffix tongue-in-cheek to almost any root to make a word which may be incorrect but sounds chic ('jogging' has become 'footing' in Spanish, for example). If that sounds clever-clever, well, I'm afraid it is.

The big losers in this war are likely to be Vueling's consejero delegado (roughly, CEO), Carlos Muñoz, and its managing director, Lázaro Ros, the company's founders. Planeta has been a shareholder since the beginning, but now seems determined to put a brake on the company's ambitions. For the crisis has been provoked by the insistence of Muñoz and Ros on selling exclusively via Internet and on a dizzying rate of expansion, unmoderated by major shareholders selling their participations (on occasion, at a loss), the consequent fall in the company's share price and the resignation of the chairman and other members of the board in protest at the stubborness of the two founders.

What will the effect be for you, me and other users? I hope, positive, in the sense that Vueling was in difficulties which threatened its survival, and the more low-cost carriers, the more competitive they need to be. Its growth plans are likely to be at least slowed, if not curtailed, which doesn't really affect you and me, it will have to cut costs, which might, and it needs to boost revenue, which it is less likely to do by increasing prices than by trying to sell more of its capacity.

A certain amount of speculation is being provoked by the fact that Lara and the Planeta Group are involved in the group led by Air France which is bidding for Iberia Airlines, the owner of Spain's other low-cost carrier, Clickair. The logical conclusion of this, goes the theory, is that Vueling and Clickair could be merged, a less than desirable prospect from the consumer's point of view. However, there are few real indicators that Iberia is about to be bought up in anything resembling the immediate future.