Iberia drags IAG to Q2 loss

LONDON (AP) ? The owner of British Airways and Iberia has reported a second-quarter loss due to a fall-off in business at the Spanish carrier.

For the three months ending June 30, International Consolidated Airlines Group reported a loss of ?95 million ($116 million) compared to a profit of ?38 million a year ago.

Revenue was up 14 percent to ?3.9 billion, and fuel costs were up 25 percent to ?1.6 billion.

Iberia posted an operating loss of ?263 million in the first half, while British Airways managed an operating profit of ?13 million.

IAG downgraded its full-year guidance from break-even on operating profit to a "small" loss.

The company added that industrial action by employees, higher fuel prices, the negative impact of exchange rates and economic weakness in Spain had all contributed to Iberia's losses, which are expected to continue for the rest of the year.

"Iberia's problems are deep and structural and the economic environment reinforces the need for permanent structural change," said IAG Chief Executive Willie Walsh. He said this is like to include downsizing in the short term and reshaping the network.

"Inevitably, we will not be able to avoid job losses as part of this process," he said. In a statement the company said that while British Airways had made an operating profit despite rising fuel prices, Iberia's losses deepened. "This is likely to include short term downsizing, network reshaping," IAG said.

The company also announced it had set up a eurozone crisis management group to make contingency plans for any further economic shocks to the 17 countries that use the euro ? up to and including a possible Spanish exit from the single European currency.

IAG shares were down 4.5 percent at 152 pence in morning trading in London.

"Although this is not a huge disappointment, we see clear downside risk to consensus estimate," said Gerald Khoo, analyst at Espirito Santo Investment Bank.

"The July traffic statistics were not particularly encouraging either, with premium traffic up 1.5 percent vs. non-premium up 5.6 percent and a flat passenger load factor." Khoo said.

In July, British Airways reported a 6.9 percent gain in revenue passenger kilometers while Iberia was up 0.9 percent. By the same measure, British Airways it 8.8 percent ahead for the first seven months of the year while Iberia is down 2.9 percent.

Source: http://news.yahoo.com/iberia-drags-iag-q2-loss-083715365--finance.html

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