British Airways owner slumps to loss amid Iberia woes

International Airlines Group (IAG), which was created from the merger of the two airlines in 2011, took hefty charges from restructuring and the write-down of Iberia’s assets as it slumped to losses of 997 million euros (£862 million).

British Airways made an operating profit of 347 million euros (£300 million) in a year when it bought and integrated regional carrier BMI, but Iberia made a loss of £351 million euros (£303.5 million).

Chief executive Willie Walsh said the results emphasised that Iberia “must adapt to survive” but, despite three months of negotiations, no agreement on a way forward has been reached between the airline and its trade unions.

It means that IAG will proceed with a 15% reduction in capacity, pay cuts and a redundancy programme that will affect 3,807 Iberia jobs.

Mr 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 and lay the foundations for profitable growth in the future.”

He added that BA was seeing the benefit of structural change as it achieved a “solid” financial performance in 2012, helped by a strong London market.

Stripping out the Iberia restructuring costs, IAG’s operating losses of 68 million euros (£58.8 million) were better than its guidance of 120 million euros (£103.7 million) in November. Shares rose 4% today as a result.

BA’s passenger revenues grew by almost 9% last year, despite some weakness over the Olympic and Paralympic Games period.

Across the group, fuel costs rose 20% to 6.1 billion euros (£5.3 billion).