IAG turns fortunes around with profits of €770 million

The owner of British Airways moved back into profit today after the business reported "huge progress" in the turnaround of Spanish carrier Iberia.

International Airlines Group (IAG), which was formed from the merger of the two airlines in 2011, posted an operating profit of €770 million last year, against the €23 million loss seen a year earlier.

The company said British Airways continued its solid performance as it benefited from additional Heathrow slots and flexibility offered by the integration of bmi. BA’s profits were £651 million, an improvement of £77 million.

Iberia made an operating loss of €166 million (£136 million) but chief executive Willie Walsh said: "Iberia has made huge progress on cost control as its restructuring takes shape and great credit should be given to all those involved."

He added that recent pay and productivity agreements between Iberia and its pilot and cabin crew unions were key to reducing the airline’s costs further.

Mr Walsh now expects the group to make steady progress towards its 2015 operating profit target of €1.8 billion (£1.5 billion), driven by falling costs.

Revenues for the year rose 3.1 per cent to €18.7 billion (£15.3 billion) while fuel costs were down 2.5 per cent to €5.95 billion (£4.9 billion).

Capacity increased by 5.2 per cent, primarily in its domestic and European markets after the acquisition of Barcelona-based Vueling, which has 12 further bases in Spain and also operates out of Amsterdam, Paris, Florence and Rome.

British Airways’ available capacity increased 2 per cent following the introduction of the A380 and Boeing 787 into the airline’s fleet.

Mr Walsh said: “The new aircrafts’ economic and environmental performance has been excellent and customers love them.”

BA’s passenger load factor was 1.4 points higher, while yields also improved 2.7 per cent from the previous year.

The group has 431 aircraft in service and employs more than 60,000 people.

Iberia’s restructuring saw 2,500 staff leave the airline under a voluntary redundancy programme, while salaries were reduced by between 11 per cent and 18 per cent. As a result, Iberia’s employee costs were down 14.3 per cent for the year.

PA