BA parent seeks six-fold earnings surge, non-junk rating by 2015

British Airways parent IAG forecast a six-fold jump in operating profit to about 1.5 billion euros ($2 billion) by 2015 as it deepens savings from a merger with Spain’s Iberia and taps its alliance with American Airlines.

Profit at IAG, as International Consolidated Airlines Group SA is known, will be lifted by annual cost and revenue synergies from its formation of about 450 million euros, 50 million euros more than previously predicted, and a 150 million euro gain from the trans-Atlantic accord with American, it said in a statement.

IAG, which had pro forma earnings of 225 million euros in 2010, said there’ll also be a 400 million-euro increase in underlying profit, plus gains of 150 million euros from organic growth, 250 million euros from introducing more efficient planes and 100 million euros each from creating low-cost unit Iberia Express and from hub improvements at Madrid’s Barajas airport.

Europe’s third-largest airline is also targeting a return to an investment-grade credit rating, something lost in 2009, with debt currently ranked BB- at Standard & Poor’s, the third- highest junk level, it said in a presentation in Madrid.

IAG, which said Nov. 4 that 2011 profit would be “around double” last year’s number, rose as much as 5.4 percent and was trading 5.1 percent higher at 148.90 pence in London, where the company is based. That pares the decline since its formation to 47 percent, valuing it at 2.76 billion pounds ($4.4 billion).

Capital expenditure will amount to 7.65 million euros through 2015, including the current year, with about two-thirds of the total dedicated to fleet replacement and growth. The company will add a net 28 planes for a total of 372 by 2015 after the delivery of 53 new jets, mostly to British Airways.

Profit will also be driven by a 30 million-euro boost from moving to a mixed fleet at BA, in which some planes are staffed by cabin crew on new, leaner contracts, the carrier said. It estimates costs from implementing the European Union’s carbon emissions trading program at 90 million euros in year one.

IAG’s Spanish unit aims to be “a profitable and renewed Iberia” by 2015, according to the document, which argues for “rejuvenating” a brand it says hasn’t been updated since 1970.