IAG doubles full-year operating profit

British Airways and Iberia parent International Airlines Group more than doubled operating profit for the full year to €485 million ($653 million), before exceptional items. The company's pre-tax profit reached €503 million for the 12 months to 31 December 2011, including the first 21 days of January before IAG's formal consolidation. IAG's revenues were up by more than 10% to €16.3 billion, although a near-30% increase took fuel costs to more than €5 billion. Other operating costs rose by 1.1% to €10.8 billion.

During the fourth quarter of 2011 the company posted an improved operating profit of €34 million, despite a heavy impact from fuel prices. Traffic for the year rose by 7.2%, in line with the airlines' hike in capacity, meaning the average load factor stayed stable at 79.1%. Passenger yield increased by 3.6%. IAG chief Willie Walsh said the consolidation had generated net synergies, in costs and revenues, of €74 million - some €64 million above the target - for the first year.

He said there were a "number of uncertainties" over the outlook for 2012. But demand from London "remains strong", said IAG, with "encouraging trends" over the North Atlantic network. But it cautioned that the fuel cost increase could be as high as €1 billion, and the economic problems in Spain and other countries with the euro as their currency will be "a major factor" regarding underlying demand growth.

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IAG determined to press ahead with Iberia Express

International Airlines Group (IAG) has "no other option" for turning around Iberia's struggling short- and medium-haul business than to press ahead with the launch of low-cost subsidiary Iberia Express, despite fierce opposition from pilots, according to chief executive Willie Walsh.

The parent company of British Airways and Iberia continues to face "stubborn resistance to reality" from pilots and each day of strike action to protest against the new carrier is costing it €3 million ($4 million). However, the expected €100 million positive impact of launching Iberia Express "outweighs the cost of the disruption", Walsh told analysts today during a conference call to discuss the group's full-year results.

Iberia's short-haul revenues remain well below 2008 levels, and the Spanish carrier as a whole performed significantly worse than BA during 2011. "This requires major surgery and that major surgery comes in the form of Iberia Express," said Walsh. The low-cost subsidiary plans to launch operations at the end of March with an initial fleet of four Airbus A320s, rising to 13 A320s by the end of the year.

Iberia Express "will give an opportunity to reverse the trend witnessed on short- and medium-haul at Iberia", said Walsh, and "will allow Iberia to create an efficient feeder airline into its long-haul hub in Madrid".
Iberia's pilots have so far carried out 12 days of strike action to voice their opposition to the new carrier. Iberia chief executive Rafael Sanchez described this as "a disgrace", adding: "We are absolutely determined to get this through - there is no way we're not going to do it. Reality will eventually get them to sit down at the table."

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