British Airways owner IAG takes off after Iberia cost cutting
The owner of British Airways and Iberia says a £610million shake-up of the struggling Spanish flag carrier is paying off, lifting the group’s shares 20p to an all-time high of 317p.
International Airlines Group (IAG) said the reorganisation of Iberia had cut the Spanish airline’s losses for the first time in almost three years in the second quarter from £81million last year to £30million.
IAG has slashed nearly 1,700 jobs at Iberia and plans to cut another 1,700 by early 2015, as well as reducing or ditching less profitable routes to Latin America and in Europe.
Chief executive Willie Walsh said: “We’ve definitely turned the corner with Iberia. It is a good start but there’s still a lot of work to do.”
The improvements at Iberia and a strong BA performance helped IAG rack up a second quarter operating profit of £213.2million from a loss of £3.5million a year ago, but first-half losses widened due to restructuring costs. BA’s second-quarter profit almost trebled from £82million to £215million, boosted by strong transatlantic traffic from London and a good European leisure market.
Walsh claimed the difference between BA’s fares and those of no-frills airlines was “negligible” once the latter added baggage charges and other fees. “Consumers are much more aware of the value BA represents,” he said. BA is offering discounts to Gatwick passengers who travel without hold bags but Walsh said it had no plans for discounts on its services from elsewhere.
IAG was not interested in buying Aer Lingus following Ryanair chief Michael O’Leary’s offer to sell its 29 per cent stake in the Irish flag carrier to a potential buyer of the airline, Walsh said. O’Leary made the offer after the UK Competition Commission said Ryanair’s stake may hinder a buyout of Aer Lingus. Walsh said: “We’re not looking to acquire anyone else at this stage.”
He claimed politicians were unlikely to back any advice from the Davies Commission, which is due to report on South-east airport capacity in 2015, to build a third runway at Heathrow.
He also slammed plans by London mayor Boris Johnson for a Thames Estuary airport. He said: “There’s no business case whatsoever for a new London hub airport. That would be a massive mistake.”