British Airways parent IAG SA posted a wider first-quarter loss as the pound weakened against the dollar and euro and workers at Spanish unit Iberia staged 10 days of strikes over 3,000 job cuts.
Europe’s third-largest airline had an operating loss of 278 million euros ($362 million), excluding one-time items, versus 249 million euros a year earlier. Analysts had anticipated a 250 million-euro loss, based on the average of four estimates.
IAG booked a 311 million-euro charge for restructuring Iberia after pushing through a plan to slash posts as it seeks a 600 million-euro earnings rebound by 2015. The London-based company said it’s no longer providing an annual profit outlook pending a shareholder vote on plane orders slated for September.
“The results are softer than we had thought,” said Donal O’Neill, an analyst at Goodbody Stockbrokers in Dublin. “The headline miss is somewhat of a concern, but the market will more likely be put off by the lack of profit guidance.”
Shares of IAG, as International Consolidated Airlines Group SA is known, fell as much as 2.9 percent and were trading 2.5 percent lower at 273.60 pence as of 9:58 a.m. in London.
The stock has advanced 48 percent this year, giving a market value of 5.07 billion pounds ($8 billion).
IAG Chief Executive Officer Willie Walsh said that at constant exchange rates the quarterly operating figure would have been 38 million euros better than a year ago.
“These results are encouraging, with underlying revenue strength in strategic markets,” Walsh said. “However while the first step towards restructuring Iberia has been taken, there is more work to be done.”
The resumption of dividend payments remains an aim in the medium to long term, though there have been no formal board discussions on the policy, according to the CEO.
British Airways had a 58 million-pound loss, including a 35 million-pound shortfall from the London Heathrow-based BMI business bought from Deutsche Lufthansa AG last year and since absorbed into the U.K. operation. Iberia’s loss was 202 million euros, according to Walsh, who said his company has no other purchases in mind, with those available representing poor value.
First-quarter sales rose 0.5 percent to 3.94 billion euros, including a 46 million-euro negative currency impact, IAG said. While fuel costs fell 3.4 percent to 1.36 billion euros and should decline almost 5 percent in the full year, non-fuel expenses, excluding items, rose 3.5 percent to 2.86 million euros, with a 24 million-euro adverse currency effect.
The pound weakened 3.8 percent against the euro in the first three months, reaching a 16-month low in February, while sliding 6.5 percent versus the dollar.
IAG said that current trading is in line with expectations, and that it expects to cut capacity 1.8 percent for the year, excluding newly acquired Spanish discount carrier Vueling SA, with non-fuel costs unchanged.
The first-quarter charge included an additional 265 million euros of employee costs at Iberia -- where 1,400 posts will be cut by the end of May following the acceptance of a mediator’s proposal -- with the balance from fleet stand-down expenses. No further restructuring charges are planned this year, Walsh said.
Gross labor-cost savings in Spain should reach 360 million euros by 2015 on 467 million euros in restructuring provisions, IAG said in a presentation to analysts. Iberia will see a “substantial” operating-loss reduction this year as labor expenses are reduced by 3 percent, it said.
Vueling, in which IAG already held a 45.85 percent stake, will cooperate with Iberia while remaining a standalone unit reporting to Walsh. Feeder flights for the main Spanish business will continue to be provided by Iberia Express.
British Airways will seek to boost margins with the first of 24 Boeing Co. 787s in coming weeks as Dreamliner deliveries resume after a three-month grounding related to battery faults.
Costs linked to the delay in handovers, which had been due to start this month, will be small, Walsh said. BA will also begin services with Airbus SAS’s A380 by mid-October.
IAG also last month announced a deal to convert 18 options for 787s to firm orders for the U.K. unit. Walsh said he remains interested in the 787-10, the largest version Boeing is mulling.
British Airways also will receive 18 Airbus A350-1000s from 2017 to replace higher fuel burn Boeing 747 jumbos while maintaining tighter control over capacity.
IAG has also committed to buy additional planes for Iberia once the Spanish business is restructured to grow profitably.