Spanish airline said to be in ‘fight for survival’
By NICOLA CLARK
The New York Times | November 10,2012
Passengers wait to board an Iberia jet in a parking zone at Barajas international airport in Madrid on Friday.
PARIS — The parent company of Iberia, Spain’s loss-making flag carrier, warned Friday that a deepening recession there and heightened competition from low-cost airlines had placed it in a “fight for survival” and announced a sweeping restructuring that will eliminate at least 4,500 jobs and cut capacity by 15 percent.
The planned reductions, equal to more than 20 percent of the airline’s workforce, came as International Airlines Group — formed by the merger of Iberia with British Airways last year — reported a 24 percent drop in third-quarter net profit and forecast an operating loss of 120 million euros, or $152 million, for the full year.
“Iberia is in a fight for survival and we will transform it to reduce its cost base so it can grow profitably in the future,” Willie Walsh, the IAG chief executive, said in a statement. Iberia’s unions were given a deadline of Jan. 31 to reach an agreement on the job cuts or face possibly deeper retrenchments.
Labor unions have been bracing for major layoffs at Iberia for months as the grip of Spain’s recession tightens and IAG has gradually shifted operation of many domestic and European flights to its low-cost subsidiary, Iberia Express. On Thursday, IAG, which owns 46 percent of Vueling, a rival Spanish low-cost carrier, made a 113 million euro bid for the rest of the airline, though it said it had no immediate plans to merge it with Iberia Express.
“The company is burning 1.7 million euros every day,” Rafael Sanchez-Lozano, Iberia’s chief executive, said in a statement. “Iberia has to modernize and adapt to the new competitive environment, as its cost base is significantly higher than its main competitors in Spain and Latin America.”
IAG said Iberia’s operating losses of 262 million euros for the first nine months of this year had all but wiped out a 286 million euro profit made by British Airways in the same period.
The job cuts were the latest retrenchments for Europe’s biggest airlines as they compete with leaner and nimbler rivals like Ryanair, easyJet and Air Berlin in Europe and with rapidly expanding Middle Eastern carriers like Emirates and Etihad on long-distance routes.
Air France in June that it would eliminate more than 5,100 jobs, or 10 percent of its workforce, by the end of next year as part of a 2 billion euro restructuring, while Lufthansa announced the elimination of 3,500 administrative jobs in May as it targets 1.5 billion euros in savings over the next three years.
While airlines globally have managed to trim costs and improve operating margins over the past year, the economic slowdown that has accompanied the sovereign debt crisis continues to weigh heavily on European carriers.
Last month, the International Air Transport Association predicted that European airlines would lose a combined $1.2 billion this year, while it forecast global industry profits of $4.1 billion. European losses are expected to shrink to $200 million in 2013, the IATA said, while airline profits worldwide are predicted to rise to $7.5 billion.