Iberia accelerates Contingency Plan and Anti-Crisis measures

The company announced yesterday it has reorganised its management structure in order to increase revenues, reduce operational costs and rationalise general expenses. Iberia now plans to reduce capacity by another 2 percentage points in the year, to 6 per cent, instead of the 4.3 per cent target previously set. To do so it will ground another three Airbus A320s and postpone delivery of a new A340-600. It will also continue to reduce staff, hold payroll costs down, and cancel or postpone about half of its planned investments. The losses posted in the quarter were due chiefly to the steep decline in operating revenues, with business class the worst-hit segment. This performance reflected that of the airline business worldwide, in the midst of the global economic crisis. Average income per available seat/kilometre (ASK) and unit passenger income dropped by 16.5 per cent and 15.5 per cent respectively in the second quarter, as slower business class seat sales and overcapacity in general have led most airlines to cut fares.

Fuller aircraft and larger market shares Iberia's cuts in supply to adjust to falling demand have enabled the company to increase both its passenger load factor and its market shares, while accelerating cost-cutting measures, improving fleet productivity, reducing staff and preserving the company's financial strength. Iberia's passenger load factor reached 81.3% in the second quarter, the highest registered by any European network airline in the quarter. In the first two quarters of 2009, the load factor came to 78.9 per cent, just 0.7 per cent below the level marked in the first half of 2008. While the load factor declined by 2.9 points in the first quarter, supply reductions helped it to recover by 1.5 points in the second, as a consequence of the capacity cuts to meet the fall in demand. Iberia reduced ASKs by 6.7% in the second quarter, the biggest capacity cuts by any major European airline, grounding five short and medium-haul aircraft (four in May and one in June), and postponed delivery of a new long-haul Airbus. Notwithstanding the cuts, Iberia gained share in its strategic markets, in keeping with the objectives set in the contingency plan. On Europe-Latin America routes, it improved its already strong leadership position by 0.1 points to 20.8 per cent. In business class on these routes it raised its share by 0.5 points to 23.8 per cent. On routes from its Madrid hub to European cites, Iberia's market share reached 43.4 per cent, representing an increase of 1.9 points in the year to date. Deeper cost cuts Operating expenses in the second quarter were 12.8 per cent below their level in the same quarter of 2008, in a decline twice as large as that of the first quarter, thanks to the cost-cutting measures in the contingency plan. Unit operating expenses (per ASK), dropped by 6.7 per cent in the quarter, while they had eased by only 0.2 per cent in the first.

A top priority: maintaining financial soundness A key objective of Iberia's contingency plan is to safeguard the company's strong financial position during the crisis. In spite of the global financial crisis and the difficult situation of the airline industry, it has succeeded in this objective, posting a gross cash position of 2,241 million euros, which was only 1.4 per cent below the position at the end of 2008.