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British Airways’ sister airline Iberia is to undergo a major restructuring after losses at the Spanish carrier sent parent company IAG’s profits tumbling.
IAG is looking to cut 4,500 jobs at Iberia as well as reducing capacity by 15 per cent and its fleet by 25 aircraft. It also told unions that the cuts could be deeper if agreement is not reached by the end of January.
The airline has not revealed full details of which routes it will cut but confirmed that Madrid to Berlin, Stockholm and Amsterdam (the last already operated by Iberia Express) will be dropped from January 10.
Iberia made an operating loss of €262 million in the first nine months of the year as IAG’s operating profit slumped from €451 million in 2011 to €17 million this year. In contrast, BA made an operating profit of €286 million over the same period.
IAG chief executive Willie Walsh said: "Iberia continues to cause concern and we are announcing today a restructuring plan to introduce permanent structural change across the airline.
“Iberia is in a fight for survival and we will transform it to reduce its cost base so it can grow profitably in the future."
IAG yesterday announced it had tabled a €113 million bid for the 54.15 per cent of Spanish carrier Vueling that it does not already own.
Rafael Sánchez-Lozano, Iberia's chief executive, said the airline was “unprofitable in all its markets” and was “burning €1.7 million every day” as it suffered from the effects of the eurozone crisis and its own high-cost base.
“Iberia has to modernise and adapt to the new competitive environment as its cost base is significantly higher than its main competitors in Spain and Latin America,” said Sánchez-Lozano.
“Time is not on our side. We have set a deadline of January 31, 2013 to reach agreement with our trade unions. We enter those negotiations in good faith. If we do not reach consensus we will have to take more radical action which will lead to greater reductions in capacity and jobs".
The company added in a statement: “In the short term the transformation will focus on stemming the losses and creating a profitable route network.
“This will include suspending loss making routes and frequencies and ensuring there is effective feed for profitable long-haul flights.
“As well as halting Iberia's financial decline we will establish a viable business that can grow profitably in the long term.
“Short and medium haul operations will be transformed to compete effectively with low cost carriers who have successfully established themselves in Iberia's home market.”