IAG seeks full ownership of LCC Vueling as its cuts Iberia to the bone

International Airlines Group (IAG) is putting its Spanish house in order and will eliminate up to 4500 jobs at Iberia and downsize the fleet by 25 aircraft while planning a full takeover of the Barcelona El Prat-based LCC Vueling Airlines.

Iberia is on a downward rollercoaster and is burning EUR1.7 million cash per day with operating losses deepening in the first nine months of 2012 to EUR262 million owing to Spain's challenging recession, the unstoppable inroads of LCCs and the airline's high cost structure.

Iberia management was crystal clear in assessing the situation and warned that the airline is "in fight for survival" and tough decisions are needed now to save the company.

IAG's intent to make a formal takeover offer for the 54% of Vueling that it does not already own is part of the Group's remedy to help restructure Iberia's money bleeding short-haul operations and regain leadership in this segment. The LCC has managed to follow a steady and profitable growth path despite the Spanish economic slowdown, with a near doubling of net profit in 9M2012 to EUR41.3 million compared to the year-ago period. Vueling will bring a low-cost platform within IAG and give IAG geographic diversification as it has bases in Amsterdam, Toulouse, Rome Fiumicino and a noteworthy presence at Paris Orly Airport.