Spanish Airline Said to Be in ‘Fight for Survival’

The planned reductions, equivalent to more than 20 percent of the airline’s work force, came as International Airlines Group — formed by the merger of Iberia with British Airways last year — reported a 24 percent drop in third-quarter net profit and forecast an operating loss of €120 million, or $150 million, for the full year.

“Iberia is in a fight for survival and we will transform it to reduce its cost base so it can grow profitably in the future,” Willie Walsh, the IAG chief executive, said in a statement. Iberia’s unions were given a deadline of Jan. 31 to reach an agreement on the job cuts or face possibly deeper retrenchments.

Labor unions have been bracing for major layoffs at Iberia for months as the grip of Spain’s recession tightens and IAG has gradually shifted operation of many domestic and European flights to its low-cost subsidiary, Iberia Express. On Thursday, IAG, which owns 46 percent of Vueling, a rival Spanish low-cost carrier, made a €113 million bid for the rest of the airline, though it said it had no immediate plans to merge it with Iberia Express.

“The company is burning €1.7 million every day,” Rafael Sánchez-Lozano, Iberia’s chief executive, said in a statement. “Iberia has to modernize and adapt to the new competitive environment, as its cost base is significantly higher than its main competitors in Spain and Latin America.”

IAG said Iberia’s operating losses of €262 million for the first nine months of this year had all but wiped out a €286 million profit made by British Airways in the same period.

The job cuts were the latest retrenchments for Europe’s biggest airlines as they compete with leaner and nimbler rivals like Ryanair, easyJet and Air Berlin in Europe and with rapidly expanding Middle Eastern carriers like Emirates and Etihad on long-distance routes.

Air France in June that it would eliminate more than 5,100 jobs, or 10 percent of its work force, by the end of next year as part of a €2 billion restructuring, while Lufthansa announced the elimination of 3,500 administrative jobs in May as it targets €1.5 billion in savings over the next three years.

While airlines globally have managed to trim costs and improve operating margins over the past year, the economic slowdown that has accompanied the sovereign debt crisis continues to weigh heavily on European carriers.

Last month, the International Air Transport Association predicted that European airlines would lose a combined $1.2 billion this year, while it forecast global industry profits of $4.1 billion. European losses are expected to shrink to $200 million in 2013, the I.A.T.A. said, while airline profits worldwide are predicted to rise to $7.5 billion.

This article has been revised to reflect the following correction:

Correction: November 9, 2012

An earlier version of this article stated incorrectly that Iberia would reduce its capacity by 25 percent. The airline’s network capacity will be cut by 15 percent, through a downsizing of its fleet by 25 aircraft.

Article source: http://www.nytimes.com/2012/11/10/business/global/spanish-airline-said-to-be-in-fight-for-survival.html?partner=rss&emc=rss