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Redundancies loom as IAG plans major Iberia overhaul

Job losses inevitable at Spanish carrier, says CEO Willie Walsh after six-month losses of 263 million euros reported

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Iberia planes on the tarmac at Madrid's Barajas airport.

International Airlines Group, the holding company for the merger of British Airways and Iberia, on Friday announced plans for a major revamp of the loss-making carrier that will inevitably involve job cuts.

Iberia made an operating loss of 263 million euros in the first six months of the year, compared with an operating profit of 13 million eruos for BA after exceptional items. IAG's operating loss for the period was 254 million euros despite an increase in passenger revenues of 11.8 percent to 7.210 billion euros.

"There remains a stark difference in the performance of our subsidiaries," IAG's chief executive Wille Walsh said in a statement. "Iberia's problems are deep and structural and the economic environment reinforces the need for permanent structural change," Walsh added. "We are currently working on a restructuring plan for Iberia, which we anticipate will be finalized by the end of September.

"This is likely to include short-term downsizing, network reshaping to deliver higher unit revenues and a re-evaluation of all aspects of the business to deliver competitive costs and service to enable long-term profitable growth. Inevitably, we will not be able to avoid job losses as part of this process."

Asked at a presentation of the results if IAG fears further industrial action by Iberia pilots in response to the restructuring, Walsh said Iberia's workforce is aware that the economic situation is bad, that competition is fierce and that the company needs to return to profitability.

Walsh said that IAG wants an agreement with the workforce on the revamp, but insisted the group would go ahead with or without an accord.

Iberia's pilots held a series of stoppages last year and this year to protest the setting up of the low-cost carrier Iberia Express, whose purpose they claim was to drive down wages and convert Iberia into a budget carrier to feed into BA's network.

In a letter to employees, Iberia Chief Executive Rafael Sánchez-Lozano said that the 263-million-euro loss posted by the airline in the first half was equivalent to 40 percent of the payroll of the workforce, adding that the restructuring would address issues such as the size of the company, job numbers and labor conditions.