Calm skies ahead? IAG's Iberia finally turns a profit

The airline group has reversed years of poor performance and actually returned a profit. And all it had to do was cut a few (thousand) Spanish jobs.

by Adam Gale
Last Updated: 26 Jan 2015

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.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Public failure can be the best thing that happens to you

But too often businesses stigmatise it.

Andrew Strauss: Leadership lessons from an international cricket captain

"It's more important to make the decision right than make the right decision."

Ranked: Britain's best-run companies

These are the businesses rated top by their peers for their quality of management.

Unconscious bias in action

Would you dislike someone just because they’re from the Forest of Dean?

I ran Iceland's central bank in 2009. Here's what I learned about crisis ...

And you thought your turnaround was tricky.

"It's easy to write a cheque you don't have to cash for 30 ...

But BP's new CEO has staked his legacy on going green.