IAG Books $1.3 Billion Pretax Loss on Iberia Woes

IAG Books $1.3 Billion Pretax Loss on Iberia Woes

International Airlines Group, the merged British Airways-Iberia carrier, slumped to a pretax loss of 997 million euros ($1.3 billion) in 2012 from a profit of 503 million euros ($659 million) in 2011 as the U.K. airline’s profits were erased by heavy losses at its underperforming Spanish partner and a soaring fuel bill.

IAG posted a $30 million operating loss against a year-earlier profit of $635 million on revenue 10.9 percent higher at $23.7 billion.

BA booked an operating profit of $455 million despite losses from integrating the U.K. carrier bmi, which it acquired last year from Lufthansa.  Iberia, by contrast, lost $460 million.

IAG cargo revenue increased 6.1 percent in the fourth quarter to $431million, but full-year sales grew just 2.3 percent to $1.6 billion.

IAG didn’t give a profit/loss figure for its merged cargo unit, which saw traffic slip 1.2 percent year-on-year in 2012 despite 3.5 percent more capacity.

“Given the continued challenging economic backdrop, we have remained focused on the continuing integration of the [BA-Iberia] business,” said Steve Gunning, managing director for IAG Cargo.

IAG Chief Executive Willie Walsh said the carrier will push ahead with plans to cut 3,800 jobs at Iberia as part of a restructuring to return the Spanish airline to profit by 2015. IAG also plans to trim capacity by 15 percent this year, mainly at Iberia, by focusing on profitable routes and trimming its fleet by 25 aircraft.

“British Airways is seeing the benefit of permanent structural change and Iberia needs to adapt to survive,” Walsh said. “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.”