Six months ago I commented on International Airline Group’s financial results.
IAG is the company that used to be called British Airways, that took over Spain’s Iberia in 2010.
The results I commented on were for six months, with a loss of €390 million. Within that, Iberia made an operating loss of €263 million, while BA managed an operating profit of €13 million.
At that time, Willie Walsh, the airline’s Chief Executive, commented:
Iberia’s problems are deep and structural and the economic environment reinforces the need for permanent structural change. We are currently working on a restructuring plan for Iberia which we anticipate will be finalised by the end of September.
Well, here we are in February. The full year results are out. IAG made a loss of almost €1 billion, including a €202 million hit for that restructuring of Iberia, and a further €343 million for “impairment of Iberia assets”. It seems that Mr Walsh’s restructuring plan has been expensive, and Iberia’s assets are not now worth nearly as much as their valuation on the balance sheet before.
The overall results include an operating loss from Iberia of €351 million, and an operating profit from British Airways of €347 million.
In other words, Iberia has cost the Group almost €1 billion this year alone. And they’re not out of the woods yet. Iberia’s staff are due to start a wave of strikes on Monday, in response to the Group’s decision to axe 3,800 jobs at Iberia.
The Group had the gall to claim, however, that
savings from the 2011 merger of British Airways and Iberia which formed IAG reached 313 million euros last year, beating a target of 225 million euros.
Last year (2011), the Group made a profit of €503 million, but Iberia again made a loss.
Comments the Telegraph:
The result is likely to lead to further questions about the decision to merge profit-making BA with Iberia in 2011.
Not from the City, it seems. The Group’s shares rose in response to the results.
The Group also bought another loss-making airline, bmi, recently.
In another article the Telegraph quotes Mr Walsh as saying
the group would save €560m by 2015 by combining BA, Iberia and bmi.
Let’s hope those projections are accurate.
All this matters. Thousands of British jobs, not to mention British national pride, depend on British Airways, and it is a tribute to the strength of that airline that it has been able to carry such huge losses from Iberia thus far.
It seems that nobody is thinking to hold Mr Walsh to account though. He has been in charge ever since those heady days in the depths of the credit crunch when he decided to buy Iberia.
It seems that hubris, empire-building and lack of accountability by Chief Executives are not restricted to banks.