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Turbulence on horizon for European airlines group

International Airlines Group, the owner of British Airways and Iberia, said its underperforming Spanish unit and high fuel costs would dent earnings this year, after it reported a forecast-beating rise in 2011 profits.

"BA is making money and Iberia is losing money. The Spanish economy is weak and operating costs at Iberia are too high, unacceptably so, but this is being tackled," chief executive Willie Walsh told reporters yesterday.

IAG, Europe's fourth-biggest airline group by market value, said 2011 operating profit doubled to €485m, helped by higher-than-expected cost savings from the BA-Iberia merger and strong growth in business and first class traffic, especially on transatlantic routes.

The group was expected to report a 2011 operating profit of €470m, according to a Thomson Reuters I/B/E/S poll.

IAG said profit in the final three months of 2011 grew well but the outlook was uncertain due to soaring fuel costs and financial uncertainty in the eurozone, especially in Spain.

Industry body IATA said yesterday the global airline industry would suffer in 2012 because of continuing high fuel prices and the eurozone debt crisis, even though passenger traffic rose in January from a year earlier and the slide in air freight seemed to have tapered off. (Reuters)

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