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BA Owner IAG Hit By Iberia Performance

(c) Sky News 2012

IAG - the company formed by merging BA and Iberia - has made an operating profit of just £13.5m in the nine months to September 30.

The results show Iberia (Madrid: IBLA.MC - news) is the weak link in the group, making a standalone operating loss of £209m in the period, while BA contributed operating profits of £228m.

On a pre-tax basis, taking wider cost pressures into account, the group made a loss of £134m in the nine months.

IAG has announced a transformation plan for Iberia, which will result in 4,500 job losses at Iberia and has proposed salary cuts for staff of 25-35% until 2015.

However unions for Iberia's workers have the restructuring plans and are preparing to take strike action.

Iberia's fleet is also being downsized by 25 aircraft and its routes are being cut by 15% in 2013, to concentrate on those which are most profitable.

"Iberia is in (a) fight for survival," the carrier's chief executive Rafael Sanchez-Lozano said in a statement.

"It is unprofitable in all its markets. We have to take tough decisions now to save the company and return it to profitability.

"Unless we take radical action to introduce permanent structural change the future for the airline is bleak."

Mr Sanchez-Lozano added: "However this plan gives us a platform to turn the business around and grow."

The group reported a 9% increase in passenger numbers and a 15% hike in fuel costs, as more job losses look likely at the Spanish airline.

Mr Sanchez-Lozano said "the Spanish and European economic crisis has impacted on Iberia, but its problems are systemic and pre-date the country's current difficulties."

IAG said it was announcing "a comprehensive plan to save Iberia after record losses and return it to profitability."

The parent group's said plans to cut 4,500 jobs are designed to safeguard around 15,500 posts across the airline.

IAG added that a deadline of January 31, 2013, had been set to reach agreement with unions over the cuts.

The group warned: "If agreement is not reached, deeper cuts and a more radical reduction in the size and scale of Iberia's operations will take place to secure the natural long haul traffic flows at Madrid and safeguard the company's future."

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