Iberia results hit by fuel prices

14th May 2008

Iberia’s first-quarter results, which the airline presented to Spain’s securities market commission (CNMV), were dulled by the sharp hikes in the price of aviation fuel, which translated into an additional cost of €66.8 million over the amount spent in the same quarter of 2007.The reorganisation of the route network and the implementation of the most of the policies specified in the airline’s 2006-2008 Strategic Plan helped cushion the impact of higher fuel prices, and net results for the quarter showed a loss of only €400,000. Thanks to these policies, unit operating costs in the quarter show a 4.8% decline when fuel is excluded from consideration.

Operating income reached €1.3 billion in the first quarter of 2008. There was a noteworthy increase in revenues from third-party aircraft maintenance clients, which climbed by 9.3% to €6.3 million. A larger number of high added-value aircraft engine maintenance jobs for other airlines explained most of this increase.

Expenses rose by 2.5% from the same quarter of 2007, owing to the sharp rise in the cost of fuel, which now accounts for 24.6% of total Iberia Group operating expenses, and nearly 30% of its transport business costs.

Employee productivity showed a 6.7% gain in the quarter, thanks in part to a 4.8% reduction in total staff. Fleet utilisation increased by 3.1% to 9.7 hours per aircraft per day.

Average punctuality of flights in the quarter improved by three points, to reach 84.9%, which places Iberia ahead of all other European network airlines, and more than five points above the average for members of the European Airline Association (AEA)


The total number of passengers per kilometre carried by Iberia (RPKs) rose by 1.5% from the level marked in the same quarter last year, and the number of available seats per kilometre (ASKs) increased by about the same proportion, so the load factor remained unchanged at 79.4%, continuing to outperform those of other European network airlines.

In the quarter, Iberia neared the conclusion of its review and optimisation plan for the flight programme, as called for in the 2006-2008 Strategic Plan. Under the new programme, seat supply (ASKs) was increased by 15.5% from 2007 for domestic and medium-haul flights, and capacity adjustments were made to individual particular point-to-point routes.

Average revenue per ASK declined by 2.0% overall, with the most severe decline -9%—registered in the medium-haul segment, due to the added emphasis on the long-haul business, which now accounts for 63% of all production, and to the operation of longer flights within Europe, owing in part to the new routes to central and eastern Europe.

Seat supply (ASKs) on long-haul flights was increased by 5.9%, while RPKs rose by 4%. The long-haul load factor came to 87.3%, 1.6 points below the level marked a year earlier, because of increased supply by competitors on routes to South America.

The load factor on international medium-haul flights improved by 1.9 points from the first quarter of 2007, to reach 68.0%, as supply (ASKs) increased by 2.9% and demand (RPKs) by 5.8%.

In keeping with Iberia’s strategy, seat supply on domestic routes diminished by 13%, and the load factor in this market reached 69.2%, a half-point below its level a year earlier.


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