BA owner completes huge turnaround

By on March 4, 2014

International Airlines Group (IAG) has posted an operating profit of R11 billion after Iberia restructuring.

British Airways (BA) owner IAG swung back into profit in 2013 after a strong performance at BA and huge progress in the restructuring of its Spanish airline Iberia.

IAG, which was created after the merger of the two airlines in 2011, posted an operating profit of more than R11 billion in 2013, compared to a R340 million loss the year before.

The swing back into the black was helped by BA’s financial performance, where profits were R9.6 billion. The airline has benefitted from additional Heathrow slots and flexibility offered by the integration of BMI, the UK carrier it acquired in 2012. BA’s passenger load factor was 1.4 points higher, while returns also improved 2.7 percent from the previous year.

Revenues were also up at Vueling, the low-cost Spanish carrier which IAG acquired in April, and its operating profit was R2 billion.

Troubled airline Iberia is still losing money but has halved its losses to R2.46 billion from R5.26 billion in 2012. More than 3 000 jobs have been cut at the Spanish airline as it undergoes a tough restructuring, while underperforming routes have also been dropped and remaining staff have taken a wage cut. Iberia has suffered from the economic crisis in Spain and stiff competition from budget carriers.

Total revenue at IAG grew 3.1 percent to R275.7 billion while passenger revenue grew almost six percent to R240 billion. Fuel costs at the group, which has 431 aircraft in service and employs more than 60 000 people, were down 2.5 percent to R88.19 billion.

“We have shown strong financial management this year. Despite buying Vueling and increasing our capital expenditure, cash was up R10.7 billion versus last year and adjusted gearing was down one point to 50 percent,” says IAG chief executive Willie Walsh.

The group is aiming to make an operating profit of R27 billion in 2015.

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