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British Airways, Iberia fly back to profit

In Uncategorized on October 29, 2010 at 9:40 am

LONDON (AFP) – British Airways and Iberia of Spain flew back into profits on Friday ahead of their merger as the pair cut costs and benefited from a fragile recovery in air travel and the global economy.


BA posted net profits of 107 millions pounds (122 millions euros, 170 million dollars) for the six months to September, its first interim profit for two years, as revenues rose and non-fuel costs fell.


In Madrid, Iberia posted a 74-million-euro net profit for its third quarter, or three months to September, after a year-earlier loss of 16.4 million euros.


The healthy results are the latest evidence of a strengthening recovery in the global airline industry which was savaged by the worldwide economic slump that hammered demand for air travel.


BA’s first-half earnings after tax compared with a net loss of 217 million pounds in the six months to September 2009, the airline said in a statement.


The profits reflected steep cost-cutting and came despite recent travel chaos caused by the Icelandic volcanic ash cloud in April and cabin crew strikes.


Next month, BA and Iberia shareholders will vote on their landmark merger deal that is due to be completed in January 2011, creating the second largest airline group in Europe after Germany’s Lufthansa.


“The changes we have made to our cost base are now having a big impact on the business,” BA chief executive Willie Walsh said.


“I’m pleased with the results today — they demonstrate that the action we have taken has been the right decision for the business. The figures speak for themselves.”


He added: “The challenge we faced was one of structural cost difference between us and our competitors.


“We are also benefiting from an improved economy, which we hope will pick up in 2011. We don’t see any evidence to support a double-dip (return to recession).”


BA revenues rose 8.4 percent to 4.45 billion pounds in the reporting period, while operating costs declined 1.5 percent.


Pre-tax profit hit 158 million pounds, compared with a year-earlier loss of 292 million pounds and way above analyst forecasts for profit of 73 million pounds.


“Our concerted efforts to introduce permanent structural change across the airline has led to a reduction in non-fuel costs and a return to profitability,” Walsh said.


Despite healthy first-half profits, BA saw its share price slide in early morning trade on Friday as the group warned that the economic outlook was uncertain — and cited a tax hike in Britain next week.


BA shares sank 2.78 percent to 272.90 pence on the London stock market, which was 0.11 percent lower in late morning trade.


On Monday, the British government will ramp up Air Passenger Duty (APD), which is levied on all flights from British airports. The tax will rise by 55 percent for the most far-flung destinations.


“While positive, the economic environment continues to be subject to uncertainty, to which the increase in APD is unhelpful. We continue to focus on managing our costs,” the British carrier said.


The BA-Iberia tie-up will create Europe’s second-biggest airline by market value after Germany’s Lufthansa, combining Iberia’s strong position in Latin America with BA’s presence in Africa, Asia and North America.


Following the merger, Walsh will become chief executive of a new umbrella company which will control the two airlines, International Consolidated Airlines Group (IAG), while Iberia chairman Antonio Vazquez will be chairman.


Earlier this month, BA launched a transatlantic alliance with Iberia and American Airlines, pledging cheaper fares and more travel choice in a new agreement for greater coordination over routes.


The tie-up allows them to cooperate commercially on flights between the European Union, Switzerland, and Norway and the United States, Mexico and Canada.

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Source: SGGP

BA, Iberia sign merger deal to create global giant

In Uncategorized on April 8, 2010 at 11:59 am

LONDON (AFP) – British Airways and Spanish flag carrier Iberia on Thursday announced a merger deal to create one of the world’s biggest airlines to compete more effectively in the fast-consolidating aviation sector.


The tie-up would create Europe’s second-biggest airline by market capitalisation after Lufthansa, combining Iberia’s strong position in Latin America with BA’s presence in Africa, Asia and North America.

British Airways and Spanish flag carrier (AFP file) Iberia announced a merger deal to create one of the world’s biggest airlines to compete more effectively in the fast-consolidating aviation sector.

“British Airways and Iberia have today taken a further step towards creating a new leading European airline group by signing their merger agreement,” the two loss-making airlines said in a joint statement.


“The new company will be one of the world’s largest airline groups with 408 aircraft flying to 200 destinations and carrying more than 58 million passengers per year.


“It has been structured so that it can take advantage of further consolidation in the global aviation industry,” they said, adding that it would benefit both airlines’ customers, employees and shareholders.


The landmark deal would create annual savings of around 400 million euros (533 million dollars) by the fifth year of the deal.


The tie-up, which requires regulatory and shareholder approvals, is expected to be completed by late 2010 and follows a preliminary accord in November.


“The merged company will provide customers with a larger combined network,” said BA chief executive Willie Walsh.


“It will also have greater potential for further growth by optimising the dual hubs of London and Madrid and provide combined investment in new products and services.”


Iberia chairman Antonio Vasquez also hailed the deal as a major step forward, as both airlines seek to avoid being sidelined by rivals Air France-KLM and Lufthansa.


“This is an important step in the process towards creating one of the world’s leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation,” Vasquez said.


Under the agreement, BA and Iberia will be grouped under a new holding company, known as International Airlines Group, which will be quoted on stock exchanges in London and Madrid.


However, both airlines will retain their current operations and individual brands.


Iberia will keep the right to terminate the merger deal if BA’s pension recovery plan is deemed to be “materially detrimental to the ecomomic premises of the merger.”


The BA-Iberia merger comes as the global downturn and the rise of low-cost airlines drives airline alliances and steep cost cutting.


Both groups have suffered steep losses as the global recession slammed the brakes on demand for air travel.


At the same time, BA has faced industrial action from cabin crew over its cost-cutting plans that are aimed at stemming losses.


The pair had signed a preliminary deal last November after lengthy negotiations — but Iberia said at the time it would back out of the agreement if BA’s giant pension deficit problem were not resolved.


Under the initial agreement set out in November, BA will own 56 percent of the new company while Iberia will hold 44 percent. Walsh would retain his position as chief executive, while Iberia would secure the chairmanship.


In addition, the new company would be headquartered in Madrid, but its operational base would be in London.


Rival groups had reacted in anger to the deal, with Ryanair comparing the merger to “two drunks trying to prop each other up.”


Virgin Atlantic, meanwhile, had argued that it will increase BA’s dominance at London’s Heathrow airport.


News of the BA-Iberia merger comes after US media reported late Tuesday that United Airlines and US Airways were in merger talks that could lead to the creation of one of the world’s largest airlines.

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Source: SGGP