International Consolidated Airlines Group SA Chief Executive Officer Willie Walsh will take a further pay freeze this year as he seeks costs cuts at the Spanish Iberia unit that led to a loss in 2012.
Walsh’s salary remains at 825,000 pounds ($1.25 million), IAG said today in its annual report. The CEO is also eligible for an incentive award worth double his base pay, depending on the group’s earnings and the performance of its share price.
Iberia CEO Rafael Sanchez-Lozano took a 6 percent cut in total remuneration last year, to 818,000 euros ($1.07 million), and in December voluntarily cut his base salary 25 percent to 474,000 euros until further notice. Staff at the Madrid-based unit are midway through the second of three week-long strikes called by unions in a bid block more than 3,000 job cuts.
“Iberia is suffering because of problems associated with the Spanish and euro-zone economies that are no fault of its own,” Walsh is quoted in the report as saying. “But it’s also suffering because of its own lack of competitiveness and it needs to be changed in a permanent and structural way.”
Walsh’s total remuneration, including benefits and pension contributions, fell almost 17 percent to 1.08 million pounds last year, the report shows. No incentive award was paid.
Keith Williams, who heads London-based IAG’s British Airways unit, saw his total pay jump 40 percent in 2012 to 1.36 million pounds after the business posted an operating profit. His base pay will also be frozen this year at 650,000 pounds.
Risks in seeking the Iberia turnaround are “high,” the report said, citing “widespread labor conflict, operational disruption, political interference” and other factors.
Concerns over the possible collapse of the euro-area have waned in the past six months, IAG said, replaced by a risk of “poor or deteriorating market conditions within an intact euro zone.” Economic recovery in Spain is not expected until 2014.
“The airline is, candidly, in a fight for viability,” IAG Chairman Antonio Vazquez said of the Spanish arm. “The restructuring plans offer a credible way to return Iberia to profitability and growth.”