The last decade in Europe saw the opening of low-cost airlines within the major legacy groups: Joon with Air France-KLM (started in 2017, shut down in 2019), Eurowings Discover in 2021 and, with the International Airlines Group (IAG) — which runs, among others, British Airways and Iberia — LEVEL.

While Eurowings Discover remains an attempt at lowering costs to and from Lufthansa’s hubs in Frankfurt and Munich in short and long-haul, LEVEL stands out as IAG’s attempt at a low-cost, long-haul airline.

This is a model that has been questioned over time. Norwegian, for instance, was already questioned for its ambitious long-haul growth before the COVID-19 pandemic hit. Joon — which also operated short-haul flights to and from Paris/Orly –, for one, did not even get to the pandemic.

Yet LEVEL, started up after Joon, withstood the pandemic. It did not go through it unscathed; it ended its short-haul operations, as well as its French long-haul unit in 2020.

But apparently, IAG believed the business made sense, at least in Barcelona, where the base was kept. In fact, if in Summer 2019 the airline had three Airbus A330-200 based in the Spanish city, it will be soon adding another two A330, reaching seven aircraft stationed there.

Yet, there is still a degree of secrecy in LEVEL’s results; as the airline is relatively small within IAG’s structure, the group is not obliged to report its financial results in a quarterly basis, and accordingly it does not.

What we know about LEVEL’s financials

LEVEL, however, was profitable in 2022; according to IAG’s financial statements for that year, the airline had a profit after tax of EUR4.866 million for the year, although it is not clear under what level of revenue, which is not stated. That is compared to a loss of EUR13.499 million in 2021, when international air travel still suffered heavily from the COVID-19 pandemic.

Of course this is not sufficient to assess the airline’s margins, but a raw measure of profitability per passenger can still be assessed. AENA, Spain’s national airport operator, frequently publishes detailed traffic data. According to the company, Iberia (whose air operator certificate LEVEL uses in its operations) carried 475,327 passengers outside of Europe to and from Barcelona in 2022.

As Iberia does not operate flights outside of Europe from Barcelona, these are LEVEL figures. And since LEVEL only flew to and from Barcelona in that year, that would translate into a net profit of EUR10.24 per passenger for the low-cost carrier in 2022. (Its average fare, and revenue per passenger, is certainly above the triple digits.)

How LEVEL does low-cost, long-haul

LEVEL raised some eyebrows once it was launched, for it was a time when Norwegian’s low-cost, long-haul business was growing strongly. It was questioned, back then, on whether the new airline was IAG’s attempt at hindering Norwegian’s long-haul advances. One of Skift’s pieces on the airline, back in its start-up, mentioned the word «Norwegian» 21 times, just one short of «LEVEL».

In an «Across the Aisle» interview on Cranky Flier, an aviation industry blog, then-CEO of IAG, Willie Walsh, said that the new airline was not as much a direct response to Norwegian as it was a demand-stimulation effort — following on what they had observed with Norwegian in markets such as London/Gatwick.

«These people are not people who are waiting there to see how much the fares are going to be with Aerolíneas Argentinas or somewhere else», said Walsh back then. «They saw a price and said ‘shit, give me some of that.’ Without question this is stimulating demand. People who will fly with us on this airline are people who didn’t believe it would be possible for them to fly.»

Whether or not the «going after Norwegian» hypothesis was true back then, COVID-19 has passed. It washed away Norwegian’s long-haul business, yet LEVEL remains.

Its model is clear: deploying very dense Airbus A330-200 into routes that generally cater to the leisure or VFR (visiting friends and relatives) customers. After a retrofit, their A330-200 will count with 42 seats in Premium Economy and 269 in Economy. As a comparison, the same aircraft at Iberia is configured with 19 seats in Business and 269 in Economy, thus with 23 less seats.

By having a denser cabin, it can pass that cost advantage on to consumers in the form of lower fares. And it helps, too, that LEVEL essentially plays in a strong position in Barcelona. As of this season, it only faces direct competition in one of its six routes, the one to New York.

And this, in theory, would open up markets that the other airlines of the group, with a higher focus on corporate travel, would not be interested in. At lower price points, the airline believes, it would be stimulating air travel that otherwise would not occur, or that would occur at a lower frequency.

Right now, in the destinations it serves, capacity by ASKs in the last quarter of this year is up 130.9% from the same period in 2016, the last one before LEVEL arrived in the market, according to Cirium’s Diio Mi application. (Note that traffic might not have grown mechanically in the same direction. For instance, some passengers may well have stopped flying one-stoppers to fly direct).

What is the way forward for LEVEL?

LEVEL’s sister airline Iberia barely has an operation in Barcelona; it has all but left the airport for Vueling, the low-cost, short-haul arm of the group, to operate from.

And this strength of IAG in Barcelona through Vueling also helps LEVEL’s proposition. It helps the long-haul airline with some degree of feed at low costs, something that Norwegian struggled with during its long-haul years.

Despite the absence of more specific numbers, the page for LEVEL in IAG’s 2022 annual report remarked that 15% of the airline’s «total volume» was in the form of connecting flights.

Barcelona’s El Prat Airport, however, is slot-constrained, so beyond IAG’s asset allocation considerations, LEVEL’s further growth may be hampered, should it not attain the best slots for its aircraft utilization. While that could be solved through coordination with Vueling, the two airlines have independent managements, so that is by no means a given. Vueling’s aircraft used in those hypothetically traded slots would have to be allocated elsewhere, and the airline might not want that.

But LEVEL plans to keep growing, now focusing on Barcelona only. Back in 2021, after shutting down the Orly and the short-haul operations of the airline, IAG’s CEO, Luís Gallego, said there would be «room for [ten] aircraft» based by the carrier in the airport, Flight Global then reported.

One could imagine that LEVEL would think twice before growing outside of its «safe haven» in Barcelona. That is because if Vueling’s connectivity is an important figure for building a strong customer base, the airline’s bases in major cities (namely Paris/Orly, London/Gatwick and Rome/Fiumicino) are only a small fraction of what Barcelona is.

And this is not to mention the existing low-cost, long-haul competition that exists in these three cities. Norse Atlantic operates from the three to a number of trunk routes (from Paris, it operates from Charles de Gaulle). In Orly, there is French Bee serving major destinations in the United States. And if the model has been in question for years now for its difficulty of turning a profit, the prospects of that would be even worse with stiffened competition.

Perhaps this is the reason why LEVEL’s page in IAG’s report mentions only Barcelona in its «looking forward» paragraph.

«We’ll continue to support and promote the city, developing alliances and synergies with local partners and providing Barcelona with a solid map of direct connections to South and North America», said the report, not mentioning any intention of bringing LEVEL’s business model to other cities in Europe.