Iberia approves British Airways’ pension plans; Lufthansa orders 40 new Airbus aircraft


European airline shares ended Wednesday's (22-Sep-2010) session lower after wider markets tumbled to a two-week low. Markets were down on the US Federal Reserve's downbeat analysis of the economy.

  • European airline shares declined as wider markets tumbled due to the US Federal Reserve's downbeat analysis of the economy.
  • Iberia approves British Airways' pension plans, signaling progress in the merger process.
  • Lufthansa orders 40 new Airbus aircraft, valued at approximately EUR3.5 billion.
  • Christoph Franz appointed as the new Chairman and CEO of Lufthansa Group, effective from 01-Jan-2011.
  • Ryanair expects slower future growth rate of 5% or lower.
  • SAS sells majority stake in Estonian Air, reducing its ownership level to 10%.

In key markets, UK's FTSE (-0.3%), Germany's DAX (-1.1%) and France's CAC (-1.3%) all declined for the day.

Iberia approves British Airways' pension plans

Iberia (-2.3%) declined after notifying the Spanish Securities Market Commission (CNMV) of its decision not to exercise its right to cancel the merger contract with British Airways (-1.2%) in relation to the agreement reached between the latter and the trustees of its pension funds. This decision represents another step forward in the merger process, which will be completed when the Shareholders General Meeting takes place, expected in Nov-2010. British Airways' employees' pensions deficit of GBP3.7 billion has been point of contention in the planned merger and gave Iberia an escape clause if it was unsatisfied with BA's plans. In Jun-2010, BA announced a recovery plan to address the pension deficit setting aside at least GBP330 million p/a until 2026.

See related CAPA Profile: Mergers and Consolidation

Lufthansa orders 40 new Airbus aircraft

Lufthansa (-1.9%) was also down, after Nomura Holdings Inc. cut its rating of the carrier's shares from "buy" to "neutral". During trading, the carrier approved the acquisition of 40 Airbus aircraft and eight Embraer regional jets. The order is valued at approximately EUR3.5 billion at list prices. The orders comprise: 20 A320 family aircraft and three A330-300s for Lufthansa; eight E195s for Lufthansa Regional; Two A320s, two A321s and five A330-300s for SWISS and; eight A319s for Germanwings. The Lufthansa Group's Airbus order backlog has increased to 91 aircraft.

See related CAPA Profile: Fleets

Also during trading, Lufthansa appointed Christoph Franz to succeed Wolfgang Mayrhuber as Chairman and CEO of the Lufthansa Group, effective 01-Jan-2011. Mr Franz is Deputy Chairman of Lufthansa. His term will run through to 31-May-2014. Carsten Spohr Chairman and CEO of Lufthansa Cargo will also be promoted to CEO of Lufthansa German Airlines and become a member of the Lufthansa Group Executive Board, effective 01-Jan-2011. Karl Ulrich Garnad has been proposed as his successor as Chairman and CEO at Lufthansa Cargo.

Ryanair expects growth to slow

Ryanair (-2.4%) slumped after CEO Michael O'Leary stated the LCC's future growth rate is likely to slow to 5% or lower.

See related report: Peanuts share wrap

The carrier plans to increase fixed salaries for executive board members by up to 25%, at the same time reducing bonus payments to conform with legal requirements.

Elsewhere, SAS (-3.4%) plummeted. Estonian Economic Ministry formally signed the sales-purchase transaction for Estonian Air during the day, increasing its stake to 90%. SAS will sell the majority of its 49% stake in the carrier, reducing its ownership level to 10%.

Cimber Sterling (+6.0%) and Aer Lingus (+1.7%) were among the few carriers to advance for the day.

Europe selected airlines daily share price movements (% change): 22-Sep-2010

Want More Analysis Like This?

CAPA Membership provides access to all news and analysis on the site, along with access to many areas of our comprehensive databases and toolsets.
Find Out More