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Europe's Airline Fight to Remain Airbound

August 28, 2009 By: Jena Tesse Fox

Iberia Airlines has vowed to accelerate its cost cutting program after sliding further into the red over the second quarter and warning that it looks set to register its first annual loss in a decade.

The Spanish airline, which has been in merger talks with British Airways for over a year, said it would reduce capacity six percent for the year, compared with the 4.3 percent previously announced.

It also announced that it was postponing the delivery of one Airbus 340-600, as well as pulling a further three short- and medium-range aircraft from its fleet. It also said it would cut further jobs and freeze wages.

The news came as Spain’s largest carrier reported a net loss of $104 million, compared with a $30 million net profit a year earlier. Revenue fell 22 percent to $1.5 billion from $1.95 billion.

The weakness of the Spanish economy resulted in a 0.7 percent fall in load factor to 78.9 percent in the first half.

Iberia blamed the mounting losses on “the fall in revenues generally, and the collapse in business travel in particular”. The collapse in premium class resulted in average revenue per available seat kilometre falling 16.5 percent year-on-year in the second quarter, while average revenue per ticket was down 15.5 percent.

Meanwhile, in Ireland, Aer Lingus may still be absorbed by arch rival Ryanair after posting deepening first half losses. But the beleaguered carrier dismissed as “speculation” new reports that it is set to make 500 redundancies from its 3,800-strong workforce in a savings plan.

Ryanair has made two offers to buy out the company. Its most recent bid attempt came last December when it offered $2 a share—half what if offered in 2006, shortly after the airline was floated on the Dublin stock exchange.

Aer Lingus has vehemently resisted Ryanair’s approaches, arguing that they have significantly undervalued the company. Ryanair is currently banned by European takeover rules from making another offer for Aer Lingus until January 2010.


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