Iberia drags IAG into loss

Iberia drags IAG into loss

British Airways and Iberia parent International Airline Group plunged into the red last year as it was dragged down by a poor performance by the Spanish carrier.

IAG’s pre-tax loss was €997 million against a 2011 profit of €503 million, including a restructuring charge of €202 million at Iberia and €343 million “impairment of Iberia intangible assets”.

An operating loss of €23 million for 2012 came against a profit of €485 million the previous year.

Losses at Iberia, which IAG is trying to restructure, came in at €351, while BA recorded an operating profit of €347 million.

IAG’s revenue for the year was up 10.9% to €18 billion while fuel costs rose by more than 20% to 6.1 billion.

The outlook for 2013 will be impacted by the outcome of the Iberia transformation plan negotiations, and any associated costs and losses, IAG said.

“Subject to these, we would expect a better pre-exceptional operating result to the one achieved in 2011.”

Chief executive Willie Walsh described 2012 as  a “year of transformation” with the takeover and integration of of BMI and the start if restructuring at Iberia.

He said: “Our operating performance was solid and the €23 million loss before exceptional items was better than our guidance to the market.

“However, there was a significant impact on the results from exceptional and non-operating items leading to a pre-tax loss of €997 million.

"These items include provision for restructuring and impairment costs in Iberia and non-cash pension accounting requirements.

"We achieved synergies of €313 million in 2012, exceeding our €225 million target set at the beginning of the year. This is another excellent performance, in particular through higher than expected revenue synergies.

“However, we must not be complacent - while this trend must continue it needs to be hand-in-hand with structural change.

"The divergent financial performance of our airlines continued. British Airways made an operating profit of €347 million, including Bmi losses, while Iberia made an operating loss of €351 million."

Turning to the Spanish carrier, Walsh said: "We have embarked on a significant transformation programme in Iberia - and these results emphasise further that the airline must adapt to survive. 

"It must stem its cash losses and adjust its cost base permanently if it is to compete with other airlines in all its strategic markets and lay the foundations for profitable growth in the future.

"Despite three months of negotiations between Iberia and its trade unions, no agreement was reached on an initial restructuring plan.

"Therefore, we have announced that Iberia will proceed with a 15% cut in capacity and has started the formal collective redundancy process which will affect 3,807 jobs.

"British Airways, which is already seeing the benefit of permanent structural change, produced a solid financial performance in 2012, benefitting from a strong London market.

"The integration of BMI into British Airways was handled very effectively and, crucially, the airline remained focused on its overall business performance during this period.

"We look forward to extracting the full potential and financial benefits that the BMI acquisition brings us in years ahead."

Walsh added: "We are watching carefully as the UK CAA reviews Heathrow airport's charges from 2014. It is critical that the airport's shareholders are not over-rewarded at the expense of customers.

"The year ended with a more positive trend as our Q4 operating loss of €40 million before exceptional items out-performed our expectations.

"This was due to a stronger BA performance, as the airline benefitted from the Bmi integration earlier than anticipated, though this was offset by a weaker Iberia performance."


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