British Airways Parent IAG Sees Profit at Spanish Iberia Unit

IAG Chief Executive Officer Willie Walsh said a turnaround for its Iberia unit in Spain will lead to a profit next year at the subsidiary, which has weighed on group earnings as the company cuts thousands of jobs.

“We will bring Iberia back into profitability,” Walsh said today at a conference in London. “All parts of the group will be profitable next year.”

The company, known in full as International Consolidated Airlines Group SA, includes British Airways and discount unit Vueling SA, which both were profitable in the last quarter for which numbers are available. Walsh is cutting more than 3,100 jobs at Iberia as part of a revitalization to achieve 1.6 billion euros ($2 billion) in operating profit in 2015.

IAG acquired full control of Vueling in April for 123.5 million euros and set up Iberia Express to allow Iberia to exit unprofitable short-haul routes. Iberia reported a 35-million euro loss ($47 million) in the second quarter.

IAG has advanced 93 percent this year as investors validated its turnaround strategy. The gain eclipses the 7 percent appreciation of Air France-KLM Group’s shares in 2013, while Deutsche Lufthansa AG has gained 1.7 percent. Lufthansa today gave an earnings outlook that fell short of analysts’ estimates as the company absorbs costs of an overhaul.

Qatar Alliance

Walsh said he will continue to expand the British Airways network in Asia as additional Boeing Co. 787 Dreamliners are delivered after starting service to Seoul and Chengdu, China. The company also is looking to Qatar Airways Ltd., which will join the Oneworld airline alliance at the end of the month to tap markets it can’t access itself, including in India, he said.

British Airways growth is constrained by lack of available capacity at its London Heathrow hub base. The U.K. government has set up a commission to review runway needs in England’s southeast.

“There will never be a third runway at Heathrow,” irrespective of what the commission, led by Howard Davies, proposes, Walsh said. Politicians will never allow expansion of Europe’s biggest airport, he told the Airport Operations Association’s annual conference in London.

Opportunities exist to expand British Airways operations at Gatwick, Europe’s busiest single-runway airport, and London City, Walsh said.

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