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British Airways owner IAG plans to reshape Iberia

The reorganisation of Spanish airline Iberia will involve job cuts

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British Airways owner, IAG announced on Friday it would restructure its Spanish airline Iberia as the group posted a loss for the first six months and cut its earnings guidance.

International Airlines Group chief executive Willie Walsh said the group would have to cut jobs and restructure the underperforming Spanish airline.

"Iberia's problems are deep and structural and the economic environment reinforces the need for permanent structural change," Walsh said in a trading update on Friday.

"The plan should be completed by the end of September and will encompass every aspect of Iberia's business."

Against a background of soaring fuel costs, Iberia made an operating loss of €263 million in the first half of 2012, compared with a €13 million euro profit at BA.

"It's been a tale of two airlines and two cities with BA and London doing well and Iberia and Madrid struggling," said Davy analyst Stephen Furlong.

"Iberia has been hit by tough economic conditions in Spain, it has a high cost base and labour costs, Spanish airport charges have risen and it is struggling to compete with low-cost airlines."

Shares in IAG, Europe's fourth-biggest airline group by market value, have fallen 10 percent in the last three months.

They were 4.3 percent down at 152.3 pence by 9:15 a.m. British time, making it the top faller on London's FTSE 100 and valuing the group at around £2.8 billion pounds.

European airlines are being hit by slower spending on air travel amid the euro zone debt crisis as well as by high fuel prices, and many have responded by shutting down unprofitable routes and limiting their spending.

IAG's European peers Lufthansa and Air France-KLM have embarked on cost cutting programmes, trimmed profit forecasts and slashed plans to expand capacity and fleets this year after results were battered by high fuel costs and weakening consumer demand.

BA and Iberia sealed an $8 billion merger in 2010, a move that helped the pair stem huge losses following the worst industry downturn in decades.

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British Airways owner IAG plans to reshape Iberia
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