Walsh's "my way or the highway" approach sounds great in theory, but missteps at BA demonstrate that the bullish CEO doesn't always have the answers.
International Airlines Group boss Willie Walsh has warned opponents to his restructuring of Iberia that the “situation is critical” and that swingeing job losses and salary cuts at the airline were just a “first step”.
Walsh told the IAG annual meeting in Madrid that the Spanish flag carrier “must restructure if it is to survive” and said that Iberia was now unprofitable in all its markets — including long-haul.
Most of the focus so far has been on the short-haul business, where Walsh set up a low-cost alternative in Iberia Express.
Losses of almost €1m daily at Iberia have wiped out profits at sister airline British Airways, which merged with its former rival in 2011.
Walsh added: “None of us want to see Iberia disappear. However, that still remains a risk unless all parts of the airline work together to transform Iberia.”
Iberia workers held two five-day strikes in February and March, forcing the cancellation of thousands of flights. Further strikes were averted after IAG accepted a mediator’s proposal to limit the severity of job losses and pay cuts, although the Spanish pilots’ trade union is taking legal action over the new terms imposed.
Measures under the agreement saw 3,300 redundancies with average salary cuts of 11% — since cut by a further 4% in April. Walsh warned of further cuts, describing the changes as “only a first step and Iberia needs to do more.”
Walsh was pointed in his praise of the low-cost subsidiary, Iberia Express, that he establised in 2012. He said: “The airline was profitable within three months, is flying to the highest industry standards and achieving excellent customer feedback. It has also created 500 new Spanish jobs.”
IAG will have further options in Spain with the addition of Vueling to the group, as it completes the acquisition of the remaining shares in the Barcelona-based low-cost airline. Walsh said that Vueling would remain a standalone business within IAG, and that it would retain its current business model, management and base in Barcelona.
Antonio Vazquez, the IAG chairman, reiterated Walsh’s message, saying: “I repeat that there is only one path that can be taken to reach this goal: to restructure in order to adapt to the new environment and be able to compete under similar conditions to those of our direct rivals.”
Despite the vast losses sustained at Iberia, Walsh has consistently defended the merger and insisted that cost savings would make it worthwhile. He said the group had “comfortably outperformed our target achieving a total of €313 million in synergies” in 2012.
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Photo credit: A Spanish Iberia Airlines aircraft lands during a pilot strike at Pablo Ruiz Picasso Airport in Malaga, southern Spain December 18, 2011. Jon Nazca / Reuters