Last year the newly formed IAG posted a first half profit to June 30th of 88 million Euros. This year it has come in with a loss of 253 million Euros thanks to a BA profit of 13 million being eclipsed by an Iberia loss of 263 million.
While many "analysts" fail to have consistently failed to clock the realites this will come as no surprise to seasoned BA and now IAG watchers and it's not all down to the current Spanish and Euro woes.
The creators of IAG understood that while BA has over the past decade and more shed large numbers of staff and made good progress on many aspects of working practices and productivity, Iberia was barely at the starting line. It was the potential of getting Iberia to the same place as BA and then taking both brands beyond that in efficiency terms that made the case for putting the two together under a newly created umbrella company look most attractive. Increased revenue and synergies from "savings" are claimed in all mergers but are difficult to really pinpoint and leave feelings that they have been over optimistic and overstated post facto.
Former BA shareholders are again seeing chances of early dividends recede .BA employees will wonder why "their " airline has been saddled with the potentially enormous costs of keeping an erstwhile competitor afloat as that task will consume money better spent on building the business, renewing the fleets and expansion. Paying interest on accumulated losses is never fun . It's just drag and doesn't move the business forward.
IAG's CEO, Wille Walsh mentions "stark differences" between the two companies. That's not news to anyone and never has been for a good few decades. He frowningly promises a restructuring plan for Iberia. That too has been neessary from long before the "merger", so why only now? Better late than never, it will include staff cuts, productivity increases, and some route rationalisation to try to establish a new lower cost higher quality platform . Once achieved, both owned brands can at some time resume growth and fight their competitors. For Iberia, Spanish labour law and attitudes to slimming down are not encouraging and the whole thing could become a long , drawn out debilitating , morale sapping ( and that's just for the management) battle with serious costs long before any promised land is reached. For BA there are still entrenched productivity and service quality issues so even there it's work in progress. That's before we talk about the short term costs of running BMi or its Heathrow slots until a new overall BA brand strategy on route development emerges, matched with the purchase and delivery of aircraft to meet the new needs of more long haul, destinations and frequencies, developmental routes, and the rebuilding the Asian network in particular. The long haul side of the BA business has been investment starved for a dozen or more years and the funding of Iberia's losses isn't going to make things any easier now.
Walsh himself says "Iberia's problems are deep and structural". That's why BA's staff and former shareholders clutching their replacement IAG scrip can reasonably ask:" What's happening? Why do we have to pay for all this? When will things get better ? Why did the former BA Board lead us here?"
There are no answers in today's statement and the ritual blaming of the economic rain in Spain for the current pain simply doesn't cut it.
While many "analysts" fail to have consistently failed to clock the realites this will come as no surprise to seasoned BA and now IAG watchers and it's not all down to the current Spanish and Euro woes.
The creators of IAG understood that while BA has over the past decade and more shed large numbers of staff and made good progress on many aspects of working practices and productivity, Iberia was barely at the starting line. It was the potential of getting Iberia to the same place as BA and then taking both brands beyond that in efficiency terms that made the case for putting the two together under a newly created umbrella company look most attractive. Increased revenue and synergies from "savings" are claimed in all mergers but are difficult to really pinpoint and leave feelings that they have been over optimistic and overstated post facto.
Former BA shareholders are again seeing chances of early dividends recede .BA employees will wonder why "their " airline has been saddled with the potentially enormous costs of keeping an erstwhile competitor afloat as that task will consume money better spent on building the business, renewing the fleets and expansion. Paying interest on accumulated losses is never fun . It's just drag and doesn't move the business forward.
IAG's CEO, Wille Walsh mentions "stark differences" between the two companies. That's not news to anyone and never has been for a good few decades. He frowningly promises a restructuring plan for Iberia. That too has been neessary from long before the "merger", so why only now? Better late than never, it will include staff cuts, productivity increases, and some route rationalisation to try to establish a new lower cost higher quality platform . Once achieved, both owned brands can at some time resume growth and fight their competitors. For Iberia, Spanish labour law and attitudes to slimming down are not encouraging and the whole thing could become a long , drawn out debilitating , morale sapping ( and that's just for the management) battle with serious costs long before any promised land is reached. For BA there are still entrenched productivity and service quality issues so even there it's work in progress. That's before we talk about the short term costs of running BMi or its Heathrow slots until a new overall BA brand strategy on route development emerges, matched with the purchase and delivery of aircraft to meet the new needs of more long haul, destinations and frequencies, developmental routes, and the rebuilding the Asian network in particular. The long haul side of the BA business has been investment starved for a dozen or more years and the funding of Iberia's losses isn't going to make things any easier now.
Walsh himself says "Iberia's problems are deep and structural". That's why BA's staff and former shareholders clutching their replacement IAG scrip can reasonably ask:" What's happening? Why do we have to pay for all this? When will things get better ? Why did the former BA Board lead us here?"
There are no answers in today's statement and the ritual blaming of the economic rain in Spain for the current pain simply doesn't cut it.
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