BA owner nosedives to billion-euro loss

International Airlines Group (IAG) has lost 997m euros for the full-year, blaming its Spanish arm Iberia and rising fuel costs.

by Michael Northcott
Last Updated: 19 Aug 2013

IAG has swung into full-year losses of almost €1bn for 2012, compared with profits of €503m the previous year. It says that the problems were caused by a massive rise in fuel costs, which rose 20% to £5.3bn, as well as a £303m loss at Iberia, its Spanish subsidiary. 

The chief executive of IAG, Willie Walsh (former boss of BA), laid blame conspicuously at Iberia’s door. He said: ‘[Iberia] must stem its cash losses and adjust its cost base permanently if it is to compete with other airlines in all its strategic markets and lay the foundations for profitable growth in the future.’ 

He did point out that IAG’s British subsidiary, British Airways, had achieved a ‘solid’ performance. It made a €347m profit – even though it acquired loss-making UK carrier BMI last year. Of course, with BA performing much better now than it has in recent years and Iberia obviously still in the doldrums, many will be asking whether it is wise to continue with plans to merge the two airlines. 

There is enough tumult in IAG as it stands: it is pushing though 3,800 job cuts at Iberia, and implementing a 15% reduction in capacity. This has predictably resulted in a clash with unions, and there have already been several strikes. Euphemised Walsh: ‘We have embarked on a significant transformation programme in Iberia and these results emphasise further that the airline must adapt to survive.’

Of course, Walsh is a dab hand at dealing with worker unrest – BA had more than its fair share of it whilst he was at the helm in the late 2000s. Reforms he was trying to implement resulted in clashes that were still unresolved until a while after he took the top job at IAG. 

One things for certain, Walsh is not a man to waste a good crisis. It looks like he’s using these bad results as a stick to beat Iberia with - its chief exec Antonio Vasquez Romero might need his tin hat...

To read MT’s profile of Willie Walsh, click here.

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