IAG warns of Iberia restructure following losses

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Published: August 3, 2012

Iberia A321. By Rob Finlayson

Sharply increased half-year losses at International Consolidated Airlines Group (IAG) have led chief executive Willie Walsh to warn of imminent major restructuring at subsidiary Iberia (IB) to correct “deep and structural” problems. Redundancies were inevitable, he said.

IAG, which comprises IB and British Airways (BA), slumped to an operating loss of €253 million ($ 312 million) before exceptional items for the six-month period ending June 30, compared to a profit of €88 million for the same period last year.

After-tax figures showed a loss of €231 million compared to a profit of €71 million year-over-year. Revenue increased 9.8% to €8.53 billion. Fuel costs were up 25%.

BA reported a half-year operating profit, after exceptional items, of €13 million; IB posted an operating loss of €263 million.

“There remains a stark difference in the performance of our subsidiaries,” Walsh said.

“Iberia’s problems are deep and structural and the economic environment reinforces the need for permanent structural change. We are currently working on a restructuring plan for Iberia which we anticipate will be finalized by the end of September,” Walsh said, adding it is likely to include “short-term downsizing, network reshaping to deliver higher unit revenues and a re-evaluation of all aspects of the business to deliver competitive costs and service to enable long-term profitable growth.” 

IB’s new low-cost subsidiary Iberia Express, has been profitable in its third full month of operation in June and has established an “exemplary operating performance from Madrid Barajas,” Walsh said (ATW Daily News, Oct. 7, 2011).

Integration of British Midlands International into BA accounted for most of the €38 million of exceptional items (ATW Daily News, June 8). Completion is due by year end, IAG said.

For the second quarter, IAG posted an operating loss of €4 million, before exceptional items, compared to an operating profit €190 million in the year-ago quarter. 

IAG was targeting a breakeven operating result for this year; however, with the Spanish economy in the doldrums, it now expected to report a small operating loss.

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