Iberia flies back into profit

Spanish flag carrier Iberia, which is due to merge with British Airways, flew into the black in the second quarter, posting net profits of ¤31m on an upturn in demand, it said Friday.

That compares with a loss of ¤73m ($93m) in the same period last year and ends six consecutive quarters of losses, the company said in a statement. The airline has been badly hit by the global economic crisis which savaged the travel industry from late 2008.

Iberia said the closing of European airspace after the eruption in April of the Icelandic volcano Eyjafjoell cost it some ¤20m in lost revenues. Earnings growth in the second quarter was 10.2 percent sequentially.

For the six months to June, sales rose 2.8 percent to ¤2.27bn but the company still reported a loss of ¤20.9m, albeit an improvement of 87.4 percent over the same period of 2009. “The recovery in income was due largely to stronger demand in international markets, and especially in business traffic, but also to heightened sales efforts by the company,” it said.

“However, the domestic market remained in the doldrums, leading to negative results.”

The airline association IATA has said that international air travel was up 9.2 percent in July, the third consecutive monthly increase.

Iberia said costs fell 5.9 percent in the first half, “thanks mainly to lower spending on fuel, reduced seat capacity and cost-containment measures.” It said sales were particularly strong on Latin American routes.

“Most of our development, in the years to come, is in Latin America,” Iberia Chairman Antonio Vasquez told a conference of analysts.

The Iberia statement said the group plans to “step up its international growth in the second half, opening new routes,” including to Cordoba in Argentina, Panama City and San Salvador, while “continuing to reduce its offers in the domestic market.”

The results were well received by analysts. “The results are very positive and show that although the domestic market is weak, the company can manage capacity to keep it in line with demand,” the Dublin-based group Davy Research said in a note.

“The positive trend in the long-haul premium service is encouraging and we see the company’s exposure to South America as a continued growth driver.” On the Madrid stock market, Iberia shares had dipped 0.13 percent at ¤2.563 by 1100 GMT after opening higher, in a market that was up 0.43 percent. AFP