Iberia Doubles Capacity Cuts As Demand Dives
Iberia will cut more than double the number of seats originally planned this year, the carrier said on Friday, just a month after first announcing a capacity reduction as recession hits demand.
"With the situation that we are seeing, we believe it is appropriate to rapidly cut supply," Chairman Fernando Conte told journalists as Iberia presented 2008 results.
Spain's biggest airline said it could cut supply by as much as 4 percent this year compared to the 1.7 percent reduction outlined in its three-year strategic plan, presented to analysts in January.
Iberia confirmed earlier on Friday it made an operating loss of EUR79 million euros (USD$100 million) last year as weakening demand in the second half prevented it handing on spiraling fuel costs.
The airline, which is in merger talks with British Airways, said net profit fell 90 percent to EUR32 million.
In the fourth quarter it made a net loss of EUR19 million, having made a EUR105 million profit for in the October-December period a year earlier.
Income fell 1.3 percent to EUR5.45 billion, while earnings before interest tax, depreciation, amortization and aircraft rentals (EBITDAR) was down 46 percent to EUR500 million.
PROFIT STILL EYED, MERGER ON TRACK
Conte said he continued to believe the airline would make its 14th straight annual profit in 2009 although he warned that earnings visibility was extremely foggy.
To contain costs, the chairman said Iberia was studying accelerating a program of early retirements and would temporarily lay off workers at its cargo division. Cost cutting will be aided by a fall in the price of fuel.
Last year the spiraling cost of crude lifted its fuel bill by almost EUR500 million to EUR1.67 billion, but this year that bill should fall by EUR300 million as long as oil remained at around USD$50, Conte said. A barrel cost USD$43 on Friday.
Conte reiterated that March would be a decisive month in the conclusion of merger talks with BA.
He said that BA's large pension deficit, which has complicated the merger would not derail a deal. "The pension plan deficit will not affect the resulting company, it will be the responsibility of BA and its employees," he said, adding that the deficit could be filled through one-off contributions.
He said the two had still to decide where the joint-carriers' headquarters would be, though both will retain different operating headquarters.
