Both British Airways and soon-to-be merger partner Iberia recorded strong results in the period to 30-Sep-2010, as yields on long haul returned and load factors improved. This makes the prospects for the post-merger operation a lot better than previously. The two will merge on 21-Jan-2011 and trade as a single entity on 24-Jan-2011.
In a “half of two quarters”, both carriers displayed the results of cost reductions and improved yields on longhaul; BA also improved its shorthaul proportion of flexible economy (higher yielding) fares.
In the third quarter, to 30-Sep-2010, Iberia recorded a net profit of EUR74 million and operating earnings were up 7% to EUR77 million, representing gains from 2009 of 90 million and EUR133 million, respectively.
Income rose across the board. Passenger revenue grew by 13.5%, down to “the good performance of the long-haul segment”. Unit income per ASK rose by 8.6%, due to improved load factors and a 4.3% growth in average earnings per RPK, Business Plus (long haul) passenger numbers returned. Freight income grew 34.5% as yields improved and traffic increased 16.9%. Good performances from the aircraft maintenance business surged 33.7% and revenue from airport handling services increased 2.1%.
For the nine months January-September, Iberia showed a EUR53 million profit, a turnaround of EUR235 million on the same period in 2009.
British Airways meanwhile recorded an operating profit of GBP370 million, for the Sep-2010 quarter, a 14.7% operating margin and a profit before tax of GBP322 million, a most creditable performance compared with a year ago. Revenue was up 17.5%, to GBP2,212 million.
CFO Keith Williams described the financial year to date as “a half of two quarters”, where the three months to 30-Jun-2010 suffered in revenue and profitability terms, but costs were clawed back, contributing to the improved second quarter, to Sep-2010.
CEO Willie Walsh attributed the turnaround to cost reduction and improved yield: “permanent structural change across the airline has led to a reduction in non-fuel costs and a return to profitability. Revenue has increased, driven primarily by yield improvements”, he said at the announcement. Second quarter yield was up16% year on year. (However, stripping out currency effects and comparing with the 2008 period, yields are still down by over 5%.)
For BA, Mr Walsh continues to sees an uncertain future: “while positive, the economic environment continues to be subject to uncertainty….We continue to focus on managing our costs.” But there are significant advantages to be reaped once the two airlines join and are able fully to exploit the benefits of one world anti-trust immunity on the North Atlantic.
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