Willie Walsh, who created British Airways’ parent firm IAG by dragging old-fashioned flag carriers into the modern-age of budget flying, is to retire and will be replaced by Iberia boss Luis Gallego.

Gallego, credited with turning round IAG-owned Iberia since taking over as CEO in 2014, will succeed Walsh on March 26, IAG said on Thursday.

The appointment of Gallego meant there would be little change of direction at IAG, analysts said. But he will be under scrutiny replacing Irishman Walsh, one of the most high-profile figures in British industry over the last 20 years, a dealmaker who made his name standing up to unions and cutting costs.

He was BA chief executive before overseeing its merger with Iberia in 2011, a deal that created an airline group which has since outperformed rivals Air France and Lufthansa, and sought to compete with budget disrupters Ryanair and easyJet.

IAG chairman Antonio Vazquez said that Gallego, 51, was the right candidate to lead IAG in the next stage of its development, as did Walsh, 58, who had said in November that he intended to retire as chief executive in the next two years.

“Luis has been a core member of the team and has shown true leadership over the years and I have no doubt he will be a great CEO of IAG,” Walsh said in a statement.

Market reaction to the news was positive, with shares in IAG trading up 1.3 per cent at 626.4 pence at 1257 GMT.

Walsh, a former pilot who has spent his career in the aviation industry, had “fantastic success at building IAG but obviously promoting internally is seen as a positive. The market regards his successor well,” Goodbody analyst Mark Simpson said.

As CEO of Iberia, Gallego cut the airline’s losses by half in his first year in charge, and in his second year made Iberia profitable 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 CAPA-Centre for Aviation.

Walsh’s departure leaves Spanish executives dominant at the top of the Anglo-Spanish group, as British Airways is run by Spaniard Alex Cruz.