What was changed
The 2011 merger that created IAG paired profitable British Airways with an Iberia deep in crisis: squeezed by low-cost carriers and Spain's high-speed trains, the Spanish flag carrier was racking up huge quarterly losses and wiping out BA's earnings inside the group.
IAG chief Willie Walsh pushed through Iberia's 'Plan de Futuro' restructuring, and in 2013 installed insider Luis Gallego to run it. The plan untangled Iberia's cost structures through thousands of job cuts and salary reductions, alongside rebranding and fleet modernization — a politically contentious fight with the workforce.
The medicine worked on schedule: Iberia returned to profit in 2014 and resumed capacity growth, helping IAG out-earn Air France-KLM and Lufthansa and giving it the strategic confidence to bid for Aer Lingus. Gallego's record at Iberia later earned him the top job at IAG in 2020.
What it achieved
Iberia returned to profit and capacity growth in 2014; its turnaround chief Luis Gallego was later promoted to run all of IAG
Why it worked
Iberia's cost base had been built for a protected flag carrier that no longer existed.
Walsh absorbed the political cost of job cuts that Spanish management alone could not push through.
Gallego, an insider, paired the cuts with brand and fleet renewal rather than shrinkage alone.
Low-cost Vueling inside the group proved the cost benchmark Iberia had to reach.
What can be applied
A flag carrier trapped between high-speed rail and low-cost rivals has to shrink to its profitable core before it can grow again.
Aftermath
Iberia stayed profitable through the rest of the decade and became IAG's Latin America gateway. Luis Gallego was promoted to IAG chief executive in 2020 — analysts citing his 'exceptional record' turning Iberia around — and led the group through COVID.
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