British Airways and Iberia parent International Airlines Group today forecast an operating loss of €120 million for 2012 as it unveiled plans to shed thousands of jobs from the Spanish carrier.
IAG admitted that Iberia was facing a “fight for survival” as it revealed a comprehensive cost cutting plan at the airline including the loss of 4,500 jobs to leave a workforce of 15,500, a 15% cut in capacity and the removal of five long haul and 20 short haul aircraft from the fleet.
A deadline of January 31, 2013 has been set to reach agreement with Iberia unions over the restructuring plan.
“If agreement is not reached, deeper cuts and a more radical reduction in the size and scale of Iberia’s operations will take place to secure the natural long haul traffic flows at Madrid and safeguard the company’s future,” IAG warned.
Chief executive Willie Walsh said: “We want Iberia to be strong and successful. For too long the narrow self-interest of the few has damaged the long term future for the many.
“We will not hesitate to take the necessary steps to protect the interests of our shareholders, our customers and our employees.
“This turnaround plan is critical for Iberia and for the future of Spain. A strong and profitable Iberia can create jobs and boost tourism, a key driver in Spain’s economic recovery.”
IAG cited continuing weakness at the Spanish carrier and the impact of Hurricane Sandy for the forecast annual group losses. IAG also suffered from a drop in business during the London Olympics.
The group made an operating profit in first nine months of the year of €17 million. BA’s operating profit of €286 million was almost wiped out by Iberia’s loss of €262 million
The group’s operating profit for the third quarter to September came in at €270 million before exceptional items, down from €363 million in the same period last year.
IAG had to absorb losses from Bmi following the takeover of the Heathrow rival earlier this year.
Walsh said: “The group performance is coming back to the levels seen in 2011 and this is particularly true if you strip out the Bmi losses of €31 million in the quarter.
“However, there remains a strong difference between the performances of British Airways and Iberia.
“British Airways’ sponsorship of the London Olympics received many plaudits and the airline successfully stimulated premium leisure demand by encouraging holidaymakers to trade up to premium cabins.
“However, as predicted, business demand was reduced leading to a one-off negative impact on underlying unit revenue this quarter.”
He added: “The full integration of Bmi into British Airways was completed last month and has been achieved smoothly and efficiently.
“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.”