IAG posts annual loss of €997m
Impairment and restructuring charges on Iberia
International Airlines Group (IAG) has posted a pre-tax loss of €997m for 2012 compared to a profit of €503m in 2011, mainly due to impairment and restructuring charges of €343m and €202m respectively on its beleaguered Spanish subsidiary Iberia.
Apart from impairment and restructuring charges, pension charges of €266m also contributed to loss of IAG.
Revenue grew by 10.9 per cent to €18.1bn in 2012, partly due to the company’s joint venture with American Airlines on transatlantic routes.
For the full year of 2012, British Airways (BA) posted an operating profit of €295m (2011: €592m), while Iberia’s operating loss grew from €896m (2011: €61m), including the impairment charge.
Willie Walsh, CEO of IAG, insisted that Iberia must adapt to survive. “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,” Walsh added.
IAG’s other exceptional items in 2012 included a €87m restructuring charge at British Midland International (BMI), the airline acquired from Lufthansa in 2012.
The restructuring charge at Iberia involves writing down all €249m of goodwill associated with the acquisition of the Spanish airline by BA in 2011, apart from its brand and other intangible assets.
Meanwhile, Iberia is considering cutting 3,800 jobs as part of its new turnround plan after it was not successful in striking a deal with unions on an earlier proposal that involved 4,500 job cuts. Under the plan, Iberia’s capacity will also be cut by 15 per cent.
Highlighting the risks associated with the Iberia turnround plan, IAG, in a statement, said: “Execution risks are high and include delayed implementation, widespread labour conflict, operational disruption, political interference, legal risk around testing new labour reforms and a lack of employee focus.”
IAG’s net debt at 31 December 2012 was €1.9bn, compared to €1.2bn a year ago.
Andrew Light, an analyst at Citi, told the Financial Times: “As expected, the poor performance of Iberia undermined the good performance of British Airways.”
IAG is the parent company of BA, Iberia and BMI.