Iberia net losses worsen, but confident British Airways merger agreement will be signed soon


European airline shares fell again on Thursday (25-Feb-2010), as the wider market retreated over renewed concerns about Greece's ability to manage its debt issues and disappointing economic data in the US. Energy shares also pushed wider markets lower, with a 2.3% drop in oil prices, to USD78.17.

  • European airline shares fell due to concerns about Greece's debt issues and disappointing US economic data.
  • Iberia reported a net loss for the year, with operating revenues and passenger revenue per ASK declining.
  • Iberia's operating costs fell due to lower fuel prices and cost-saving initiatives.
  • Iberia's chairman expressed confidence in the merger with British Airways, expecting a deal to be signed soon.
  • TUI Travel's stocks gained after strong bookings for the 2010 holiday periods.
  • Other news includes Ryanair's new route announcement and strategic alliances between Air Southwest and Eastern Airways, and US Airways and Brussels Airlines.

In key markets, UK's FTSE (-1.2%), France's CAC (-1.8%) and Germany's DAX (-1.7%) were all down at the end of trading.

Iberia net loss continues to decline; confident British Airways merger agreement will be signed soon

Iberia (-3.7%) slipped after reporting a net loss after tax of EUR273 million for the 12 months ended 31-Dec-2010, compared to a loss of EUR32 million in the previous corresponding period. For 4Q2009, the carrier reported net losses after tax ballooned to EUR91 million, compared to a loss of EUR19 million in the previous corresponding period.

Operating revenues fell by 19.1% year-on-year for the year, to EUR4,409 milllion, principally due to the sharp decline in transport revenues (passenger and cargo), following a generalised decline in demand, particularly within the business segment. Passenger revenue per ASK fell by 14.3%, to EUR5.05 cents.

Operating costs fell by 11.9%, helped by the significant fall in fuel prices. Other expenses were also reduced due to capacity adjustments and cost-saving initiatives put in place under the Contingency Plan. Unit costs fell by 6.3%, to EUR7.84 cents.

Following a capacity (ASK) reduction of 6% year-on-year to adapt to current demand, and traffic (RPKs) fell 6.2%, overall load factor slipped 0.2 ppts, to 79.8%.

Iberia Chairman, Antonio Vazquez, stated he is confident the British Airways will be able to find a solution to its pension deficit issues and a merger between the two carriers will go ahead, with a definite deal to be signed in the "next few weeks". British Airways (-1.2%) was also down yesterday.

See related report: Airline structural change in Europe: a major turning point - if labour allows it

TUI Travel gains

TUI Travel (+2.2%) was meanwhile one of the few gainers on Thursday, after Carnival Cruises announced plans to lift prices after strong bookings for the 2010 holiday periods, suggesting improving demand for travel. Nine out of 21 broker notes rated TUI's stocks as 'Strong Buy', while three rated it as 'Buy', according to What Investment and Digital Look.

Other stories available in today's Europe Airline Daily include:

Europe selected airlines daily share price movements (% change): 25-Feb-2010

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