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Willie Walsh has said that British Airways’ Spanish sister airline Iberia had turned the corner, despite continued losses dragging the parent group €500m into the red in the first half of 2013.
The International Airlines Group (IAG) chief executive said a significantly improved performance and huge layoffs were putting Iberia en route to profitability.
IAG, which recently acquired the Spanish carrier Vueling, made a pre-tax loss of €506m (£442m) in the six months to 30 June. The last quarter showed a marked upturn, and excluding “exceptional items” such as restructuring costs as Iberia cut its fleet and made 1,700 staff redundant, the airline’s losses were down to €33m over the past three months.
BA’s operating profits rose to €247m in the same quarter. Walsh said a strong London economy, and transatlantic traffic were the basis for BA’s success, but the airline also had good results in the short-haul leisure market, improving at Gatwick with the introduction of reduced, hand baggage-only fares.
Walsh said the main improvement was at Iberia. “We’ve definitely turned the corner. There’s a big transformation going on there.” He said 2,400 employees would have left Iberia by the end of the year, but added: “Significantly they’re also improving their commercial performance – it’s not just the cost base.”
He said Iberia’s revamped website was driving sales, improving both revenue and costs.
Vueling contributed €27m operating profit in just over two months. Walsh said it would continue expanding into Germany, Scandinavia, Greece, and “a little” in Britain. He said the airline had a lower cost base than most low-cost carriers – bar Ryanair – with a “superior offering”.
Walsh confirmed he would not want to buy Aer Lingus, recently advertised as for sale by Ryanair, which has a 29% holding. He said Ryanair boss Michael O’Leary was “trying to drive up the value of the shareholding”, adding: “I think [O’Leary] is clearly making the strongest case he can possibly make that he should be allowed to retain his stake in Aer Lingus. It’s a very smart solution to the challenge that the competition commission have put there. He’s just called everyone’s bluff”.
Walsh again criticised Heathrow, in the continuing standoff over airport charges. The London airport has asked the regulator to raise landing charges above inflation for the next five years, arguing that shareholders need better returns. Walsh said its recently revised offer was not credible, adding: “They’ve made more than adequate returns for their shareholders. Their costs are the highest of any hub. They have plenty of scope for efficiencies and if they want to invest they will get more than adequate returns. It’s not a credible proposal at all.”
The IAG boss also had uncomfortable words for the other airports that submitted expansion plans to the Airports Commission last month. While he praised the work of Howard Davies and the commission, Walsh said: “It doesn’t matter how good it is or how clear and unambiguous the recommendations are, [the report] will be handed to politicians who won’t act on it. It will sit on a shelf gathering dust.”
He said he did not believe opposition to Heathrow or Stansted expansion could be overcome, and said there was “no business case whatsover for a new hub airport. That would be a massive mistake.”
He Walsh said a new runway at Gatwick was unnecessary and airlines would not fund it through higher charges: “I don’t see any airlines have an interest in expansion. I can’t see how the owners will justify the investment – I can’t see EasyJet and certainly not BA funding a runway that isn’t needed at Gatwick.”
Shares in IAG, which are up 57% so far this year, rose more than 6% to 315.75p.
This article originally appeared on guardian.co.uk