IAG losses blamed on Spanish crisis
THE OWNER of British Airways and Iberia rang the alarm bells on its exposure to Spain yesterday, announcing contingency plans for a euro exit by the country and a wholesale restructuring of its underperforming Spanish carrier.
International Airlines Group (IAG) said it had set up a team to study the impact on the business if Europe’s fourth-largest economy was forced to leave the euro. IAG said the group meets every two weeks to “scenario-plan based on previous shocks to the business” and had drawn up “a Spain euro exit roadmap project” in the event Spain was forced to leave the euro zone.
The move comes as IAG announced plans to overhaul Iberia as the group cut its full-year earnings guidance after a first-half group loss. Willie Walsh, the head of IAG, said the Iberia reorganisation would mean shedding jobs and reshaping its network.
“Iberia’s problems are deep and structural and the economic environment reinforces the need for permanent structural change,” Mr Walsh said. “The plan should be completed by the end of September and will encompass every aspect of Iberia’s business.”
Against a background of soaring fuel costs, Iberia made an operating loss of €263 million in the first half of 2012, compared with a €13 million profit at BA.
“It’s been a tale of two airlines and two cities with BA and London doing well and Iberia and Madrid struggling,” said Davy analyst Stephen Furlong.
IAG, which earlier this year predicted it would break even in 2012, expects to make a small operating loss for the year. It reported a group operating loss of €253 million in the six months to the end of June compared with a profit of €88 million in the same period a year ago. – (Reuters)