Turning around a struggling airline conglomerate in the face of fast-growing, low-cost competition can’t be easy. In the case of Europe’s second-largest carrier group IAG, it must have seemed more like sticking the Titanic into reverse than doing a 180 in an Airbus.
And yet, today, IAG chief exec Willie Walsh announced he had done just that. The firm, which owns British Airways, Iberia and low-cost carrier Vueling, reported a pre-tax profit of €96m (£76m) in the six months to June 30th, up from a €503m loss in the same period last year.
The reason for this dramatic shift in fortunes is the improvement in Iberia’s performance. If you imagine BA, Iberia and Vueling as a 400m relay team, Iberia is the overweight guy at the back, nursing a hangover. But now it seems Walsh’s controversial cost-cutting policies, which have already shed 4,500 jobs at the Spanish airline, are getting Iberia back into shape at last.
It finally returned an operating profit – €16m in the second quarter of this year – after years of heavy losses, and the pattern looks set to continue. IAG signed an agreement last week with its staff to cut a further 1,427 jobs, while it is also adopting what Walsh calls a ‘disciplined approach to capacity’, with plans to reduce that by 3% over the winter this year.
All this takes some pressure off long-suffering relay partner BA, which is continuing to do better, improving its second quarter operating profits from €247m in 2013 to €332m this year. Looks like there could finally be less bag-carrying for the British flag carrier.