Iberia Sees 2010 Profit, BA Tie-Up Not Urgent
Iberia should return to profitability next year, but management is so preoccupied with the worst downturn in memory that merger talks with British Airways are on the back burner, its bosses said Tuesday.
Iberia Chairman Fernando Conte said he was still hopeful of a tie-up to create Europe's third-largest carrier, even if it was taking longer than expected, partly because of market volatility and its effect on BA's pension deficit.
"We are currently mainly focused on our own contingency plan which we believe is the most important and immediate challenge. However, even with the difficulties we are facing, we remain positive on the outcome of negotiations (with BA)," Conte told analysts.
Earlier on Tuesday, Iberia reiterated expectations of a net loss in 2009 after the company posted a worse-than-expected EUR147 million euro (USD$200 million) first quarter operating loss.
"For 2010 we envisage a probable return to profitability with the impact of our contingency plan if the fuel price remains at current levels, even with today's traffic and revenue figures," Conte said, referring to a profit at both the net and EBIT level.
CRISIS PLAN
In response to a 9.5 percent fall in demand in the first quarter, the airline outlined a plan to save between EUR110 million to EUR125 million by cutting 10 percent of the 21,500-strong work force, cutting 4.3 percent of capacity and other savings affecting its offices, suppliers and IT.
In addition it will cut planned investments by EUR80 million to EUR90 million.
Iberia's first quarter capacity reduction from January to February was greater than those by Air France, Lufthansa and British Airways, reflecting the particularly dire position of the Spanish economy and the effect on traffic.
Analysts said a return to profit next year was expected since Iberia would enjoy the full benefit of lower fuel prices, however it was Conte's subtly upbeat comments on traffic trends that helped it lead a rise in European airline shares.
He said traffic on short and medium haul routes would continue to enjoy the tentative stabilization recorded in March and April. Summer bookings were still unclear, he said, due to a trend towards last-minute reservations.
"The numbers are plainly dreadful and worse than consensus," said RBS airlines analyst Andrew Lobbenberg, noting that the stock had strongly underperformed peers since it reversed guidance and forecast a 2009 loss and scrapped a 2008 dividend.
"There was the odd straw of good news in that traffic trends are still bad, but less bad than they were," he said.
April passenger traffic rose 2.6 percent, thanks to the late Easter. Load factor rose 4.2 percent, it said.
Q1 revenues fell 15.6 percent to EUR1.10 billion, while net loss widened to EUR92.6 million from EUR400,000.
