IAG Posts Overall Profit But Iberia In 'Fight For Survival' - Business Travel News

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IAG Posts Overall Profit But Iberia In 'Fight For Survival'

November 09, 2012 - 10:45 AM ET

By David Jonas

International Airlines Group, parent of British Airways and Iberia, for the September quarter posted an operating profit of €270 million before exceptional items and an overall profit after tax of €202 million, down from €267 million a year earlier. "The group performance is coming back to the levels seen in 2011," according to chief executive Willie Walsh. "However, there remains a strong difference between the performances of British Airways and Iberia."

Iberia, for example, during the first nine months of 2012 generated an operating loss of €262 million, compared with BA's operating profit of €286 million. As a result, IAG on Friday laid out a "comprehensive plan to save Iberia after record losses."

That plan includes "permanent structural change across all areas of the business." Iberia would see a 15 percent capacity reduction in 2013 "to focus on profitable routes," a smaller fleet, 4,500 job cuts and "new commercial initiatives to boost unit revenues including increased ancillary sales."

Iberia would revise its network to ensure "there is effective feed for profitable long-haul flights." Short- and medium-haul flights, meanwhile, "will be transformed to compete effectively with low-cost carriers who have successfully established themselves in Iberia's home market."

Iberia set a deadline of Jan. 31, 2013, to reach new deals with worker unions. "If we do not reach consensus we will have to take more radical action which will lead to greater reductions in capacity and jobs," according to Iberia chief executive Rafael Sánchez-Lozano. "Iberia is in fight for survival. It is unprofitable in all its markets."

Sánchez-Lozano added that Iberia's "systemic" problems pre-date the Spanish and European economic crises, and that the carrier currently is "burning €1.7 million every day. Time is not on our side."

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