Iberia airlines to cut 4,500 jobs as part of IAG restructuring plan

British Airways-owner IAG has announced 4,500 job cuts at Iberia as part of a widely anticipated restructuring of the Spanish carrier.

Iberia is cutting its 156-strong fleet by 25 aircraft, and reducing 15% of its network capacity, with the airline focusing on the most profitable routes.

The plan aims to stem Iberia’s cash losses by mid-2013, and raise profits by at least 600 million euros ($766 million).

IAG also revealed a 30% drop in pre-tax quarterly profits to 221 million euros.

The drop was due to the poor performance at Iberia and at the recently-purchased UK regional airline BMI, as well as rising fuel, operating and engineering costs.

“The group performance is coming back to the levels seen in 2011 and this is particularly true if you strip out the BMI losses of 31 million euros in the quarter,” said IAG chief executive Willie Walsh.

“However, there remains a strong difference between the performances of British Airways and Iberia.”

The parent company said it now expected to make an overall operating loss of 120 million euros for the year – excluding any costs associated with the Iberia restructuring – with further losses likely in the remaining three months due to the impact of storm Sandy in the US.

Its pre-tax losses for the first nine months of the year have now reached 169 million euros, compared with a 355 million-euro profit in the same period last year.

Iberia has been suffering record losses, and IAG flagged up three months ago that job cuts were likely to come.

“Iberia is in a fight for survival,” said the Spanish subsidiary’s chief executive, Rafael Sanchez-Lozano.

“It is unprofitable in all its markets.

“Unless we take radical action to introduce permanent structural change, the future for the airline is bleak.”

The 4,500 job losses are not as steep as the 7,000 figure that reportedly had been expected by the airline’s unions.

IAG said the restructuring would safeguard 15,500 posts at the airline.

However, the restructuring plan also includes “permanent salary adjustments to achieve a competitive and flexible cost base”.

The airline has set a deadline of 31 January next year to reach agreement with unions over the cuts.

“Time is not on our side,” said Rafael Sanchez-Lozano.

“The company is burning 1.7 million euros every day,” he added.

“If we do not reach consensus, we will have to take more radical action, which will lead to greater reductions in capacity and jobs.”

The restructuring plan comes a day after IAG announced that it would pay 113 million euros to buy up the remaining 54% stake in Spanish budget airline Vueling that it did not already own.

Willie Walsh had said that the acquisition of Vueling would be “good for Spain” and “create new Spanish jobs”.

On Wednesday, IAG released its latest passenger figures for October, which showed that traffic rose by 6.2% at British Airways from a year earlier, while at Iberia traffic was down 3.7%.

The airline’s woes in part stem from the weakness of the eurozone economy, including a sharp downturn in its Spanish home market. However, according to Rafael Sanchez-Lozano, the airline’s problems are also “systemic and pre-date the country’s problems”.