Iberia drags owner IAG to Q2 loss

The owner of British Airways and Iberia has reported a second-quarter loss due to a fall-off in business at the Spanish carrier.

For the three months ending June 30, International Airlines Group (IAG) reported a loss of 95 million euros ($A111 million) compared with a profit of 38 million euros a year ago.

Revenue was up 14 per cent to 3.9 billion euros, and fuel costs were up 25 per cent to 1.6 billion euros.

Iberia posted an operating loss of 263 million euros in the first half, while British Airways managed an operating profit of 13 million euros.

IAG downgraded its full-year guidance from break-even on operating profit to a "small" loss.

The company said industrial action by employees, higher fuel prices, the negative impact of exchange rates and economic weakness in Spain had all contributed to Iberia's losses, which were expected to continue for the rest of the year.

"Iberia's problems are deep and structural and the economic environment reinforces the need for permanent structural change," said IAG Chief Executive Willie Walsh. He said this could include downsizing in the short term and reshaping the network.

"Inevitably, we will not be able to avoid job losses as part of this process," he said.

The company also announced that it had set up a eurozone crisis management group to make contingency plans for further economic shocks to the 17 countries that use the euro - up to and including a possible Spanish exit from the single European currency.

"Although this is not a huge disappointment, we see clear downside risk to consensus estimate," said Gerald Khoo, analyst at Espirito Santo Investment Bank.

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