IBERIA flew even deeper into the red over its latest nine-month trading period, the Spanish flag-carrier revealed yesterday, starkly highlighting the reason for its enthusiasm for the merger with British Airways.
The Spanish airline said losses in the first nine months of the year more than tripled to 181.9 million (£162.4m).
This was significantly worse than the 51.1m loss in the same period of 2008. Iberia revealed it made a 16.4m loss in the third-quart
er, against a profit of 30.4m in Q3 last year.
BA and Iberia agreed their merger late on Thursday to create the world's third-largest airline by revenue. Both carriers have been hammered by the airline industry's worst downturn in decades.
Iberia said its loss before interest and taxes widened to 331m, and was bigger than analysts' average forecast for a 320m loss, as aggressive cost-cutting was not enough to compensate for a 20 per cent fall in revenues.
One airline analyst said: "Iberia has done some aggressive campaigning to fill its planes, even at cheap fares, and margins have suffered as a result."
Iberia said in its statement: "The airline industry in Spain is facing exceptionally difficult circumstances."
The company said it carried 5.1 per cent fewer passengers in October, while its load factor – a measure of how full its planes fly – improved to 80.6 per cent.
BA posted a £292m pre-tax loss last week as Willie Walsh, its chief executive, forecast revenue would fall by £1 billion this year. The International Air Transport Association expects airlines to lose $11bn (£6.6bn) in 2009.
BA and Iberia have said they expect to close their merger in December 2010, with Walsh taking the chief executive role, and Iberia's chairman, Antonio Vazquez, becoming chairman of the new company.
BA will control 55 per cent of the new company, based in London, and Iberia 45 per cent, while the airlines will keep their independent liveries.
However, one Madrid-based equities sales trader said there was still a chance the merger plan could collapse over BA's £3bn pension deficit.
He said: "There's still a risk that the deal will fall through. It's all hanging on BA's negotiating weight with trustees over its pension fund." BA's pension deficit was one of the stumbling blocks in the 16-month merger talks and was used as a key negotiating tool for Iberia.
The Spanish airline has said it reserves the right to back out of the merger if the final agreement between BA and the administrators of its pension fund is not "reasonably satisfactory." The Unite trade union – which is already at loggerheads with BA over current job losses – yesterday said it would not back the merger unless commitments were given to avoid compulsory redundancies.
Unite also called for assurances that passenger service standards in a merged airline would be of the highest quality.
Steve Turner, Unite's national officer for civil aviation, said:
"It is imperative that both companies sit down as soon as possible with the unions here and in Spain to discuss how jobs and standards can be safeguarded."
AIRPORT OWNER TO RAISE £500MBAA, the UK airport operator, is injecting £500 million into its London airports to shore up their balance sheets.
The group – which owns Heathrow and Stansted – said it was raising £200m from its existing shareholders, while a further £300m would be transferred from BAA's parent company, FGP Topco, which in turn is owned by Spanish group Ferrovial, the Quebec state pension fund and Singapore's sovereign wealth fund.
BAA said the extra cash would be used to cut debt and improve its access to bond markets.
BAA also owns Glasgow, Edinburgh and Aberdeen airports, but may be forced to sell one Central Belt site.
