IAG Share Price: Loss-making Iberia in Critical State, Willie Walsh Warns

on Jun 21, 2013
Updated: Feb 27, 2024
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International Airlines Group’s share price (LON:IAG) has climbed by 0.26 percent to 264.90p in London morning trading today, June 21, as investors shrugged off comments by chief executive Willie Walsh that the survival of the group’s Iberia is far from certain despite a radical restructuring involving thousands of job cuts.

Walsh said at IAG’s annual shareholders meeting yesterday that the 3,000 job cuts and 25 grounded planes at the Spanish flag carrier were just the beginning. “It’s only a first step and Iberia needs to do more,” the chief executive commented. “It’s vital that everyone within the company understands that they have to make sacrifices to help save Iberia.”

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Shareholders were also told that Iberia was now unprofitable in all its markets, including long-haul. The carrier is accumulating losses of about €1 million (₤854 million) a day, wiping out revenue coming from sister airline British Airways, which merged with its former rival in 2011. “None of us want to see Iberia disappear. However, that still remains a risk unless all parts of the airline work together to transform Iberia,” Walsh said.

“Willie’s remarks are consistent with maintaining pressure and creating an air of crisis to keep shoulders to the wheel,” a City analyst commented, as quoted by The Times. Antonio Vázquez, chairman of the board and chief executive of Iberia, has blamed the company’s failure on state support for some of its European rival airlines. Vázquez told shareholders that at least €800 million (₤683 million) of subsidies had been given out to ten European airlines since 2011: “This is exactly what the aviation sector does not need to become efficient.” According to an IAG spokeswoman, the airlines that had been bailed out were Alitalia, TAP, Adria, airBaltic, Estonian Air, Air Malta, Cyprus Airways, LOT, SAS and Brussels Airlines.

Despite the huge losses accumulated at Iberia, Walsh has consistently defended the merger with British Airways, insisting that cost savings would make it worthwhile. He told investors that the group had “comfortably outperformed our target achieving a total of €313 million [₤267 million] in synergies” in 2012.
**Analysts on IAG**
Deutsche Bank analysts reiterated their “buy” rating on IAG’s shares in a research note sent to investors on Tuesday. They gave the airline group a price target of 330p.

!m[International Airlines Group’s share price (LON:IAG) ](/uploads/story/3270/thumbs/pic1_inline.png)
A total of four analysts have rated the stock with a “sell” rating, six have given it a “hold” rating and seventeen have assigned a “buy” rating. The company has a consensus rating of “hold” and an average price target of 474.05p.
International Airlines Group has seen its market value climb by more than forty percent in the year-to-date, despite Iberia’s woes.
**IAG’s share price was 265.40p as of 21.06.2013, 08.10 BST**
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