European Indexes at 2-Week Low, Iberia Plans to Cut 4,500 Jobs

Arthi Gupta
09 Nov, 2012
New York City

The European indexes edged lower to a 2-week low and Greece stepped closer to winning the next tranche of bailout after approving in a narrow vote

[R]3:10 PM Frankfurt – The European indexes edged lower to a 2-week low and Greece stepped closer to winning the next tranche of bailout after approving in a narrow vote €13.5 billion of austerity measures. IAG plans to slash 4,500 jobs in its Iberia unit.[/R]

The European indexes declined to a 2-week low after Greece stepped closer securing the next tranche of bailout after a tight vote in favor of €13.5 billion austerity measures.

The Greek parliament approved a law on austerity measures on Wednesday paving the way for securing the next bailout tranche worth €31.5 billion from the international lenders. Greece is set to approve its 2013 budget in a vote on Sunday.

However, Greece may not immediately receive the next tranche of bailout from the troika until finance ministers of the euro zone agree at the next meeting. Greece will be running out of liquidity in November.

In Paris trading, the CAC-40 Index declined 6.40 or 0.2% to 3,401.60 and in Frankfurt the DAX Index edged lower 64.59 or 0.9% to 7,140.21.

For the week, the CAC-40 Index slumped 2.6% and the DAX Index plunged 3%.

Separately, there is mounting pressure on Spain to ask for a bailout on rising bond yields.

The yields on Spain’s benchmark were little changed today at 5.85%. Italian 10-year yields were at 4.998%.

IAG to Slash Jobs

International Consolidated Airlines Group S.A. said it is formulating a comprehensive plan to save Iberia after record losses and return it to profitability. The transformation plan includes cutting 4,500 jobs in the Iberia unit to safeguard around 15,500 posts across the airline.

Network capacity will be cut by 15% in 2013 to focus on profitable routes and downsizing its fleet by 25 aircraft.

The transformation plan aims at stemming Iberia''s cash losses by mid-2013, and expects a turnaround to profitability of at least €600 million from 2012 levels to align Iberia with IAG''s target return on capital of 12% by 2015.