IAG Takes the Knife to Iberia - A Merger Mistake?

Many students and teachers will be familiar with the merger between British Airways and Iberia - which came together to form International Airlines Group ("IAG"). The merger was a pretty long drawn-out affair but the respective shareholders of the two airlines eventually agreed the deal. Over a year later, it looks as though BA may have taken on much more than they expected in Iberia. So the board of IAG has decided to implement a substantial cost reduction plan at Iberia which looks likely to strain industrial relations with the workforce in Spain.

As you might expect, there is plenty of coverage in the financial media about IAG's plan.

For example, the BBC report that:

British Airways-owner IAG has announced 4,500 job cuts at Iberia as part of a widely anticipated restructuring of the Spanish carrier.

Iberia is cutting its 156-strong fleet by 25 aircraft, and reducing 15% of its network capacity, with the airline focusing on the most profitable routes.

The plan aims to stem Iberia's cash losses by mid-2013, and raise profits by at least 600m euros ($766m; £479m).

This video from the influential LEX team at the Financial Times is also worth a watch. It is a good example of some analysis and evaluation in action. The reasons for, and background to the decisions relating to Iberia are examined.