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BA owner reports £425m annual profits

International Airlines Group net profits more than doubled in three months to end of 2011, despite f

International Airlines Group net profits more than doubled in three months to end of 2011, despite fuel increase.

International Airlines Group (IAG), the company formed by the $8bn merger of British Airways and the Spanish carrier airline Iberia, has reported a six-fold increase in its annual profits to £425m (€503m). At €16.3bn, the company's revenue for 2011 is up 10.4 per cent on 2010 when IAG was formed. That year, annual profits were €84m.

Willie Walsh, the chief executive of IAG, told reporters:

BA is making money and Iberia is losing money. The Spanish economy is weak and operating costs at Iberia are too high, unacceptably so, but this is being tackled.

The rise in IAG's profits comes despite an increase of almost 30 per cent in fuel costs. In a statement on the full year results, Walsh warned that this, along with and tax increases, would be a factor in 2012:

The performance of our airlines reflects the different markets in which they operate. The north Atlantic market remains strong, benefitting British Airways. However, British aviation's competiveness is undermined by the UK government's determination to continually increase Air Passenger Duty with the latest rise due this April. In 2011 British Airways paid almost £500 million in APD. As a result of the latest increase, the airline is reducing by around half the number of new jobs it's creating this year and has postponed plans to bring an extra Boeing 747 back into service.

On Wedesnday's BBC Radio 4 Today programme, Walsh defended the announcement on the halving of new jobs by fiercely attacking the British coalition for falsely claiming to have a growth agenda. Walsh said "government policy is destroying jobs in aviation and tourism in UK".

Currently Europe's fourth biggest airline group, IAG announced in December that it had agreed to buy BMI from the German carrier Lufthansa for £172.5m. BMI holds 11 per cent of take-off and landing slots at London Heathrow, the busiest airport in the UK and third busiest in the world by passenger traffic. Completion of the takeover was predicted to take place early this year. Virgin Atlantic responded by calling to the European Competition Commissioner for an outright ban on the bid, which would see BA holding over half of all of Heathrow's take-off and landing slots. Virgin argued:

There are no appropriate remedies to negate the anti-competitive harm arising from the proposed transaction.

Richard Branson, the Virgin chairman, stepped in earlier this month, calling on a block to the merger:

This takeover would take British flying back to the dark ages. For years pioneering airlines have fought to provide consumers with more choice and lower fares. This move will see British Airways unravel all of this progress made. BA has a track record of dominating routes, forcing less flying and higher prices. BA is already operating on 60 per cent of BMI's routes so this move is clearly about knocking out the competition.

On Today, Walsh came out against Virgin's claims, saying IAG was "stepping in to rescue what is [basically] a bankrupt company and turn that into profitability as quickly as possible." He rejected claims that the price on some flight routes would be "jacked-up" by IAG.

Elsewhere in the year-end statement, Walsh said of the buy-out:

In December, we signed a binding agreement with Lufthansa to buy BMI. While subject to regulatory approval, we plan to integrate BMI mainline into British Airways following agreement by BA pilots to make productivity changes that justify the integration.

Alice Gribbin is a Teaching-Writing Fellow at the Iowa Writers' Workshop. She was formerly the editorial assistant at the New Statesman.

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The Tories' aim is to put Labour out of business for good

Rather than merely winning again, the Conservatives are seeking to inflict permanent damage on the opposition. 

The Conservatives are numerically weak but politically strong – that is the peculiarity of their position. Their majority is the smallest of any single-party government since October 1974. Yet, to MPs at the Tory conference in Manchester, it felt like “2001 in reverse”: the year of Tony Blair’s second election victory. Then, as now, the opposition responded to defeat by selecting a leader, Iain Duncan Smith, who was immediately derided as unelectable. Just as Labour knew then that it would win in 2005, so the Conservatives believe that they have been gifted victory in 2020. David Cameron has predicted that the party’s vote share could rise from 37 per cent to a Thatcherite 43 per cent.

For Cameron and George Osborne, who entered parliament in 2001, this moment is revenge for New Labour’s electoral hegemony. They believe that by applying Blair’s lessons better than his internal successors, they can emulate his achievements. The former Labour prime minister once spoke of his party as “the political wing of the British people”. In Manchester, Cameron and Osborne displayed similarly imperial ambitions. They regard Jeremy Corbyn’s election as a chance to realign the political landscape permanently.

Seen from one perspective, the Tories underperformed on 7 May. They consistently led by roughly 20 points on the defining issues of the economy and leadership but defeated Labour by just 6.5 overall. It was their enduring reputation as the party of the plutocracy that produced this disparity. Those who voted for Labour in spite of their doubts about Ed Miliband and the party’s economic competence may not be similarly forgiving of Corbyn. To maximise their gains, however, the Tories need to minimise their weaknesses, rather than merely exploit Labour’s.

This process began at conference. At a dinner organised by the modernising group the Good Right, Duncan Smith, Michael Gove and the Scottish Tory leader, Ruth Davidson, affirmed their belief that, contrary to Thatcherite orthodoxy, inequality is a problem. Only the Business Secretary, Sajid Javid, an admirer of the libertarian heroine Ayn Rand, insisted that equality of opportunity was the defining metric.

George Osborne’s assured speech was most notable for his sustained appeal to Labour voters. Several opposition MPs told me how unsettled they were by the Chancellor’s declaration that Labour’s new leadership calls “anyone who believes in strong national defence, a market economy and the country living within its means” a Tory. He added, “It’s our job to make sure they’re absolutely right. Because we’re now the party of work, the only true party of labour.” The shadow minister Jonathan Reynolds told me: “We’ve got to be extremely clear that this is not business as usual. This is a real attempt by the Tories to put us out of business – possibly for ever.”

The Conservatives’ aim is to contaminate Labour to the point where, even if Jeremy Corbyn were deposed, the toxin would endure. For those opposition MPs who emphasise being a government-in-waiting, rather than a protest movement, the contrast between the high politics of the Tory conference and Corbyn’s rally appearance in Manchester was painfully sharp. They fear guilt by association with the demonstrators who spat at and abused journalists and Tory delegates. The declaration by a rally speaker, Terry Pullinger, the deputy general secretary of the Communication Workers Union, that Corbyn’s election “almost makes you want to celebrate the fact that Labour lost” was regarded as confirmation that some on the left merely desire to run the party, not the country.

But few Tory MPs I spoke to greeted Corbyn’s victory with simple jubilation. “It’s a great shame, what’s happened to Labour,” one said. “We need a credible opposition.” In the absence of this, some fear the Conservatives’ self-destructive tendencies will reassert themselves. The forthcoming EU referendum and leadership contest are rich in cannibalistic potential. Tories spoke forebodingly of the inevitable schism between European Inners and Outers. As the Scottish experience demonstrated, referendums are almost never definitive. In the event of a close result, the party’s anti-EU wing will swiftly identify grounds for a second vote.

Several cabinet ministers, however, spoke of their confidence in Cameron’s ability to navigate the rapids of the referendum and his pre-announced departure. “More than ever, he’s the right man for these times,” one told me. By this December, Cameron will have led his party for ten years, a reign exceeded in recent history only by Stanley Baldwin, Winston Churchill and Margaret Thatcher. That the Conservatives have so far avoided cataclysm is an underappreciated achievement.

Yet there are landmines ahead. An increasing number of MPs fear that the planned cuts to tax credits could be a foul-up comparable to Gordon Brown’s abolition of the 10p tax rate. Despite the appeals of Boris Johnson and the Sun, Cameron and Osborne have signalled that there will be no backtracking. At such moments of reflection, the Tories console themselves with the belief that, although voters may use Corbyn as a receptacle for protest (as they did Michael Foot, Neil Kinnock and Ed Miliband), they will not elect him. They also acknowledge that the current Labour leader may not be their opponent in 2020. The former paratrooper Dan Jarvis is most often cited as the successor they fear. As with Cameron and Blair, his relative lack of ideological definition may prove to be a strength, one MP suggested.

William Hague is fond of joking that the Tories have only two modes: panic and complacency. If the danger before the general election was of the former, the danger now is of the latter. 

George Eaton is political editor of the New Statesman.