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Iberia to fly to profit without 4,500 jobs

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Staff writer |
Iberia AirlineInternational Consolidated Airlines Group (IAG) will cut more than 20% of jobs at its Spanish unit Iberia, trying to save the company after the Q3 profit went down 25 percent. "Iberia is in fight for survival," said Iberia's CEO Rafael Sánchez-Lozano.

IAG announced a plan to save Iberia after record losses with cut of 4,500 jobs and return it to profitability. Iberia's transformation plan will introduce structural change across all areas of the business. The company intend to reduce cash losses by mid-2013, it plans new initiatives to boost unit revenues including increased ancillary sales and website redesign, and the plan also includes a turnaround in profitability of at least €600 million from 2012 levels to align Iberia with IAG's target return on capital of 12 per cent by 2015.

To achive that the company will downsize its fleet by 25 aircraft (five long haul and 20 short haul), there will be a reduction of 4,500 jobs to safeguard around 15,500 posts across the airline, and non-profitable third party maintenance and retain profitable ground handling services outside Madrid will be discontinued. All transformation will be funded from Iberia's internal resources.

In the first run the transformation will focus on stemming the losses and creating a profitable route network, and the focus will be on the profitabilty in the short term. Short and medium haul operations will be transformed to compete with low cost carriers in Iberia's home market. The company set the deadline at January 31, 2013, to reach agreement with the unions and if it's not reached, deeper cuts and a more radical reductions will take place.

Iberia Airline CEO Rafael Sanchez-LozanoRafael Sanchez-Lozano, Iberia's chief executive, said in the statement: "Iberia is in fight for survival. 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. However this plan gives us a platform to turn the business around and grow. The Spanish and European economic crisis has impacted on Iberia, but its problems are systemic and pre-date the country's current difficulties. The company is burning €1.7 million every day."

IAG's move is obvious if we bear in mind that Iberia's losses nulify all earnings from British Airways which had a nine-month profit of 286 million euros.

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