Iberia

IAG, the owner of British Airways, on Friday posted a pre-tax profit from continuing operations, after exceptional items, of £186m, a significant turnaround from making a big loss last year. Total revenue grew 3.1%, despite a near 12% decline in cargo revenue. Passenger revenue grew almost 6%.

IAG Logo

One of the reasons for the return to profitability has been the reduced losses at its Spanish airline, Iberia, and the acquisition of the budget carrier, Vueling.

Iberia A330

Iberia – profitable soon?

Willie Walsh, IAG’s chief executive, said Britsh Airways has also benefited from cost improvements and the additional Heathrow take-off and landing slots it acquired through its 2012 takeover of the loss-making UK carrier, BMI.

British Airways made a large operating profit for the 12 months to December 31, and Iberia, while remaining in the red, reduced its losses. Vueling has made an operating profit since April.

 

Mr Walsh said: “In 2013, we strengthened the group by acquiring Vueling, embarking on Iberia’s transformation and enhancing British Airways’ revenue performance. This has led to a strong financial recovery and return to profitability.”

The company expects to make “steady progress” this year towards its target of generating a group operating profit of approximately £1.5bn by the end of 2015.

Mr. Willie Walsh

Willie Walsh

Willie also said “I think the report is excellent, the commission has done some really good work. The problem is political, the failure to embrace the findings of the report. I don’t see any sign that politicians have changed their view,” “I think the politicians will try to avoid this issue and they’ll be sitting here in several years debating this issue and we’ll be losing ground. The economy will suffer as a result of lack of runway capacity in general,”.

Amazingly, the last full-length runway in the South East of England was opened in 1946.

British Airways parent company IAG has reported a return to profit in the last quarter.

IAGIAG, parent company of British Airways, Iberia and Vueling, reported an operating profit of 245 million euros (£214) for the second quarter of the year, a significant improvement on the 4 million euro loss reported for the same period last year.

The turn-around in fortunes is partly down to an improvement in trading at Iberia, with losses at 35 million euros, down from 95 million previously, but mainly a result of an increase in profits at British Airways , up from 94 million euros to 247 million euros. Vueling, which finally came under the control of IAG in April also contributed 26 million euros in profits for the quarter.

A poll tax on flying

Willie

Commenting on the results, IAG CEO Willie Walsh stated: “This is the first step in the restructuring but it is already bearing fruit with Iberia’s [second quarter] losses down from €93m last year to €35m, reversing the negative trend of the last 11 quarters”.

He went on to advise that more than 1,700 staff have now left Iberia since re-structuring of the airline begun, with remaining staff seeing signifcant cuts in their salary ranging from 11% to 18%.

With IAG’s results beating market expectations, IAG was this morning biggest rises on the FTSE 100 with the share price up 3.5% at 307.80.

A380-in-sky-landing

 

 

British Airways parent company, IAG, has reported a significant increase in capacity and passengers carried compared to June 2012 although this increase is entirely down to the takeover of Spanish low cost carrier Vueling.

Stripping out the effects of the takeover, the pattern of trade remains the same at IAG – a small growth in passenger numbers at British Airways but steep declines at Iberia.

 

Group Performance1 Month of June Year to Date
2013 2012 Change 2013 2012 Change
Passengers Carried (’000s) 6,531 5,048 29.4%  28,858 25,721 12.2%
Domestic (UK & Spain) 1,695 1,160 46.1%  6,482 5,534 17.1%
Europe 3,094 2,142 44.4%  13,082 10,798 21.2%
North America 845 802 5.4%  4,127 4,057 1.7%
Latin America & Caribbean 341 388 -12.1%  2,064 2,317 -10.9%
Africa, Middle East & S.Asia 410 421 -2.6%  2,319 2,270 2.2%
Asia Pacific 146 135 8.1%  784 745 5.2%
 

Willie Walsh, CEO of British Airways parent company IAG, has warned that its Spanish unit, Iberia, is in a critical condition.

iberia a319Speaking 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.

British Airways Willie Walsh“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.

British Airways daily 777 service to Accra

 

 

 

 

 

British Airways parent IAG today blamed an earlier half term in the UK for a fall in premium traffic during May.

Across the IAG group, which now comprises British Airways, Iberia & Vueling, premium traffic was down 2.9% in May compared to the same month last year. “Traffic and load factor were affected by an earlier UK half term and an additional bank holiday compared to last year,” commented IAG.

Overall, total passenger traffic increased some 2.7% at British Airways while sister airline Iberia experienced a massive 16.30% decline. On an airline by airline basis, IAG failed to say where the respective rises and falls had come from.

A short while ago, shares in IAG were down just over 1% at 268.37.

First class cabin in a British Airways A380