IAG expects to make a loss in 2012 due to problems in Spanish economy

IAG – which owns BA – will make a loss this year, due to Spain’s growing economic problems. IAG is planning a major restructuring of its Spanish business, describing Iberia’s problems as “deep and structural”. This will involve cutting back the network and job losses at a time when Spanish unemployment is soaring and it is in dispute with the airline’s pilots. BA meanwhile made an operating profit despite rising fuel prices while Iberia’s losses deepened. Any benefit from cheaper jet fuel has been more than offset by the deterioration in Spanish economic conditions. Overall IAG made an operating loss of €253m for the first half including €50m of losses from its recent acquisition, bmi. There were also €38m of restructuring charges related to bmi. In July BA cancelled plans to issue its first secured bond backed by its Heathrow ake-off and landing slots due to insufficient demand.  

 

British Airways owner IAG plans restructuring at Iberia after Spanish headwinds

Airline now expects to make a full year operating loss in the wake of Spain’s financial problems

3.8.2012 (Guardian)

International Airlines Group – the owner of British Airways and Iberia – will be pushed into a full year loss thanks to Spain’s growing economic problems.

The group is planning a major restructuring of its Spanish business, describing Iberia’s problems as “deep and structural”. This will involve cutting back the network and job losses at a time when Spanish unemployment is soaring and it is in dispute with the airline’s pilots. Chief executive Willie Walsh said:

There remains a stark difference in the performance of our subsidiaries. British Airways made an operating profit despite rising fuel prices while Iberia’s losses deepened.

A number of factors have improved over the past three months. Underlying BA trading conditions remain firm and bmi integration is on track, but any benefit from an easing of fuel prices has been more than offset by the deterioration in Spanish economic conditions.

We were previously targeting a break-even operating result this year, after the impact of restructuring costs and the short term earnings drag from the bmi acquisition. However, in the light of the Spanish macro headwind, we now expect to make a small operating loss in 2012.

Overall the group made an operating loss of €253m for the first half including €50m of losses from its recent acquisition, bmi. There were also €38m of restructuring charges related to bmi.

The company’s shares have dropped 5.4p to 153.9p, making it the biggest faller in a rising FTSE 100. But analysts mostly remained positive. Douglas McNeill at Charles Stanley said:

IAG’s second year continues to be a lot less good than its first, with a first-time inclusion of losses from newly-acquired bmi compounding the pain of a billion-euro hike in the fuel bill. Yields are increasing at much the rate we expected and non-fuel costs look to be under control, but our 2012 forecasts will have to move down a bit to reflect new guidance. However, this is unlikely to alter our positive view on the stock, which we think does not price in enough of the gains from the original merger and the bmi deal.

… and it continues ….

http://www.guardian.co.uk/business/marketforceslive/2012/aug/03/british-airways-iberia-spain?CMP=twt_fd


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Earlier:

 

IAG-owned British Airways has cancelled plans to issue its first secured bond backed by its valuable take-off and landing slots at Heathrow due to insufficient demand.  Earlier this month IAG said it hoped the bond issue – backed by Heathrow slots, routes between London City Airport and JFK in New York and two leased Airbus planes – would help it raise £250 million. On Thursday ratings agency Standard & Poors raised its long-term corporate credit rating on British Airways to ‘BB’ from ‘BB-‘ after it performed better than S&P had expected in the first half of 2012.  (Investors presumably did not see the slots as good security).



International Airlines cancels proposed £250m British Airways bond issue after lack of demand

20.7.2012 (Guardian)

by Nick Fletcher

Company says its first bond secured on landing slots and US routes would not proceed

Shares in International Airlines Group have lost nearly 2% after a bond issue for its British Airways subsidiary failed to take off.

Early in July the group said it hoped to raise £250m with its first secured bond, to be backed by its take-off and landing slots at Heathrow and its routes between London City Airport and New York. It said the final terms and timing would depend on investor feedback.

But despite Moody’s giving the bond an A3 grade rating, the feedback must have been negative.

The company has just said it would not proceed with the issue:

There was a lack of demand for this bond at a price which would compare with other financing alternatives.

IAG’s shares are currently down 3.1p at 157p.