Iberia seeks to shed 4,500 jobs
Shares in the owner of British Airways neared the top of the FTSE 100 yesterday as investors welcomed its plans to cut costs at Iberia, its Spanish flag carrier. International Airlines Group, created by the merger of the two airlines in 2011, said lossmaking Iberia was in a “fight for survival” as it unveiled sweeping plans to cut 4,500 jobs at the Madrid-based carrier.
The reduction amounts to more than 20 per cent of Iberia’s workforce, but IAG said there could be deeper cuts if the company did not reach agreement with trade unions by the end of January.
IAG expects to record an operating loss of €120 million for 2012, principally because of the Spanish unit’s problems.
Meanwhile IAG’s third-quarter revenues were better than had been feared, up 9.1 per cent, but flat in constant currency terms, stripping out the effect of exchange rates. However, analysts voiced disappointment that non-fuels costs rose 8.5 per cent in the period.
“Although radical changes are proposed at Iberia, this reflects the scale and extent of the problems there,” said Gerald Khoo, analyst at Espírito Santo Investment Bank.
“We continue to believe the market has underestimated the scale and nature of the challenge faced by Iberia.”
Nonetheless, shares in the group rose 1.2 per cent to 170p and third place on the FTSE.
For the nine months to September 30, IAG reported a loss before tax of €169 million, compared to a profit of €355 million in the same period last year. Revenue was up 10.8 per cent to €13.6 billion.
While British Airways recorded an operating profit of €286 million in the first three quarters of this year, Iberia lost €262 million.
IAG’s expected €120 million operating loss in 2012 also reflects its acquisition of BMI British Midland from Lufthansa, which was completed in April. BMI has been lossmaking.– Copyright The Financial Times Limited 2012