4,000 jobs to go as Iberia fights for life

 

The owner of British Airways and Iberia yesterday announced plans to axe more than 4,000 jobs, sell off planes and cut routes at the Spanish airline, admitting its loss-making purchase was in a "fight for survival".

International Airlines Group, formed from the merger of BA and Iberia last year, is to fire more than a fifth of Iberia's workforce and warned, in terms reminiscent of chief executive Willie Walsh's tough negotiations with BA unions in recent years, that cuts would go deeper if the unions do not agree by 31 January.

IAG said Iberia was "burning €1.7m (£1.4m) every day" and was "un- profitable in all its markets".

The airline's struggles stem from its home country's deep recession and severe unemployment. Mr Walsh, who faced years of strikes with the Unite union over his restructuring plans at BA, said of Iberia yesterday: "For too long the narrow self-interest of the few has damaged the long-term future for the many. Time is not on our side. The Spanish and European economic crisis has impacted on Iberia, but its problems are systemic and pre-date the country's current difficulties."

The warning came as IAG cut full-year forecasts and said it will post a €120m (£100m) operating loss for 2012, after a surprise profits warning in August when it downgraded expectations from breaking even to posting "a small operating loss" this year. It said the annual loss included the impact of Hurricane Sandy, which triggered mass flight cancellations.

But the loss is mainly because of the headwinds at Iberia: for the nine months to October, IAG reported a pre-tax loss of €169m as BA's €286m operating profit was wiped out by Iberia's €262m loss plus the costs of turning around its purchase of regional airline BMI this year.

The loss compares with a €394m pre-tax profit the same time a year earlier.

Yet Mr Walsh claims he has no regrets about buying Iberia just before Spain's economy collapsed. He said this summer: "We knew there were challenges in Iberia, and the economic environment has accelerated the need to tackle them."

When creating IAG, he said the airlines group deliberately had a vague name in order to buy up other airlines. After acquiring BMI from Lufthansa for £172.5m this year, IAG has now mounted a €113m bid to take full control of Spanish budget carrier Vueling, up from its current 46 per cent stake.

IAG shares ticked up 2.6p to 170.6p.

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