Willie Walsh, CEO of British Airways parent company IAG, has warned that its Spanish unit, Iberia, is in a critical condition.
Speaking at IAG’s annual meeting in Madrid, Walsh stated that Iberia was losing 1 million euros a day and was now loss making across all its sectors, ie both short haul and long haul. In the past, the emphasis has very much been on Iberia’s short haul division, and the need to make significant structural changes to combat low cost carriers. The revelation that even the long-haul division, once one of the most profitable in Europe, is now loss making will be of great concern to all the relevant stakeholders.
“None of us want to see Iberia disappear” stated Walsh, ”however, that still remains a risk unless all parts of the airline work together to transform Iberia.” He then one again used the experience of Iberia Express, established in 2012, to showcase just what could be achieved if everyone agreed to managements proposals for change: “The airline was profitable within three months, is flying to the highest industry standards and achieving excellent customer feedback. It has also created 500 new Spanish jobs.”
His comments were backed up by the Chairman of IAG, Antonio Vazquez: “I repeat that there is only one path that can be taken to reach this goal: to restructure in order to adapt to the new environment and be able to compete under similar conditions to those of our direct rivals.”
So is there a chance that Iberia could be closed down? Possibly but not probably. Although its losses are undoubtedly hurting IAG, profits at British Airways mean the situation isn’t quite as critical as it would have been had Iberia been a stand alone business. In addition, expectations are that Mr Walsh will succeed in driving down costs at Iberia, just as he did at British Airways, allowing the airline to profit from an eventual upturn in the market.