Improving Iberia to return to growth in second quarter

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Spanish carrier Iberia will return to growth in the second quarter as it begins restoring some of the capacity heavily cut in its restructuring last year.

Iberia cut capacity around 15% last year as part of major restructuring which involved taking around 25 aircraft out of its fleet and axing more than 3,000 jobs.

The restructuring has seen steady improvements in stemming the Spanish carrier's losses. Its first-quarter deficit was almost halved to €111 million ($154 million). Bolstered by new three-year productivity deals reached earlier this year with its unions, Iberia is now on course to return profit at an operating level this year. "I said before I would expect Iberia to make a small operating profit this year and I haven't changed my view on that," said IAG chief executive Willie Walsh during a first-quarter results call today.

IAG had made the labour deals – which took a year to broker, and will return 4% of salary cut to staff in return for productivity improvements – a condition of any return to growth for Iberia. The Spanish carrier will now increase capacity 3.3% over the three months ending 30 June – its first quarter of growth since the cuts – and by 4.6% across the full year.

The Spanish carrier is adding flights to Berlin and Stockholm during the second quarter, and will lift frequency on its Chicago and Mexico City routes. It will also reinstate flights to the Uruguayan capital Montevideo – axed last year – in September.

"There clearly is a short-term opportunity to repair some of the network changes that we made. If you go back to the capacity changes we made at the time, they were pretty blunt because we needed to take very quick action to reduce capacity," says Walsh.

"The capacity we have put back is aimed at improving the quality of the network. So the short-haul capacity is designed to ensure we’ve got a good feed into the long-haul network and the long-haul capacity is going in where we can get immediate advantage of operating benefits of the A330 and improved productivity with the pilots."

Iberia has been adding A330-300s to replace older A340s in the fleet and IAG also holds options for a total of 44 Airbus A350s and Boeing 787s to renew the Spanish carrier's long-haul fleet – which have been subject to satisfactory restructuring.

"The real benefit comes from the new aircraft that Iberia will get in due course, so we've got a decision to make in relation to A350 or 787s," says Walsh. "They will significantly improve the underlying operating performance of Iberia."