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* Walsh has been CEO since IAG's formation in 2011
* Will be replaced by Iberia CEO Luis Gallego
* Gallego credited with returning Iberia to profit
* IAG shares up 1.9%
(Adds investor comment)
By Sarah Young
LONDON, Jan 9 (Reuters) - Willie Walsh, who created British
Airways parent IAG by dragging old-fashioned flag
carriers into the modern age of budget flying, will step down in
March to be replaced by Iberia boss Luis Gallego.
Walsh, who had announced in November that he intended to
retire in the next two years, will be succeeded by the man
credited with turning round IAG-owned Iberia since on March 26,
IAG said on Thursday.
The appointment of Gallego, CEO of Iberia since 2014, meant
there would be little change of direction at IAG, analysts said.
But the Spaniard will face intense scrutiny as he takes over
from one of the most high-profile figures in British industry
over the past 20 years.
Irishman Walsh, a dealmaker who made his name standing up to
unions and cutting costs, was BA chief executive before
overseeing its merger with Iberia in 2011. That deal created an
airline group that has since outperformed rivals Air France
and Lufthansa while seeking to compete with
budget disrupters Ryanair and easyJet.
IAG chairman Antonio Vazquez said that Gallego, 51, is the
right candidate to replace the retiring Walsh, 58, and lead IAG
in the next stage of its development.
Richard Buxton, of IAG shareholder Merian Global Investors,
said Walsh's departure represented the end of an era.
"But as they say, all good things must come to an end. I
know his successor is a good egg, otherwise the board would not
have appointed him," Buxton said.
Market reaction was positive, with IAG shares gaining 1.9%
to 630 pence by 1432 GMT.
IBERIA TURNAROUND
As CEO of Iberia, Gallego cut the airline's losses by half
in his first year in charge and in his second year restored
profitability after six years of operating losses.
"Luis has successfully turned Iberia around in his years in
charge and has much experience of the Willie Walsh/IAG
approach," said Jonathan Wober, analyst at the CAPA-Centre for
Aviation research company.
Gallego faces a number of challenges in his new role, not
least the "flygskam", or "flight shame", movement that has shone
a spotlight on aviation emissions and encourages people not to
fly.
More specifically, IAG last year scaled back its three-year
capacity growth plans, citing the competitive environment, and
it has also been contending with reputational damage from pilot
strikes at BA, which accounts for over half of group profit.
Merian Global's Buxton said he would like the new CEO to do
more to improve labour relations between staff and management,
adding that the top-15 investor is counting on the new IAG
leadership to do more to knit its brands together.
SLASHER WALSH
Walsh, a former pilot, took on the unions and slashed costs
first at Ireland's Aer Lingus, where he became CEO in 2001, and
then at British Airways, earning him the nickname Slasher Walsh
in an industry he once characterised as a "fight for survival".
It was at Aer Lingus where he formed the template for his
strategy, benefiting from a front-row seat to the rapid
expansion of budget rival Ryanair.
Walsh was much quicker than Air France-KLM and Lufthansa to
embrace budget flying. IAG bought short-haul carrier Vueling in
2015 and set up long-haul, low-cost carrier Level in 2017.
Those strategies have helped to fuel success at IAG, shares
of which are up 140% since 2011. Lufthansa shares, meanwhile,
has remained flat over the period and Air France stock has
declined by 29%.
Walsh also bought Aer Lingus in 2015 and IAG is in the
process of a 1 billion euro ($1.1 billion) deal to buy Spain's
Air Europa.
IAG said that Walsh would step down from his role and the
board of IAG on March 26 before retiring on June 30, leaving
Spanish executives dominant at the top of the Anglo-Spanish
group. IAG's chairman is also Spanish, as is BA boss Alex Cruz.
($1 = 0.9001 euros)
(Reporting by Sarah Young; additional reporting by Sinead
Cruise, Clara-Laeila Laudette in Madrid and Noor Zainab Hussain
in Bengaluru
Editing by Susan Fenton and David Goodman)
