Air Transport World

Iberia reborn: Spain's national carrier has transformed itself into one of Europe's profitable network airlines.(Profile)(Iberia Lineas Aereas de Espana S.A.)(statistical data included)

One year ago this month, Fernando Conte took over from his ex-GE and ABB colleague Xabier de Irala as chairman and CEO of Iberia. When asked what he would describe as the most challenging aspect of his first 12 months at the helm of the Spanish carrier, he answers without hesitation: "The external events that have been happening and disturbing the airline industry. Nevertheless," he continues, "we have been either doing a good job or we have been fortunate, and we have coped in a decent way."

Conte is too modest. Measured against its counterparts in Europe and North America, Iberia is doing much more than coping. It ranks among Europe's most profitable network carriers, having earned 143.6 million [euro] ($171 million) in 2003 and 2351 million [euro] over the past three years. Moreover, according to Citigroup Smith Barney, it "is the highest quality European flag carrier in terms of balance sheet strength." At year end Iberia Group had a net cash position on its balance sheet in excess of 700 million [euro] and a gross cash position of around 1.3 billion [euro].

"Iberia is the only network carrier in Europe, and maybe one of the only [legacy] carriers on a global basis, that has been able to achieve eight consecutive years of profits," CFO Enrique Dupuy observes with a satisfied smile. That's quite a turnaround from the early 1990s when it was in a situation of "technical bankruptcy."

While he acknowledges that the airline got its share of state aid, Dupuy notes that in this regard it was no different from other European flag carriers of the time--some of which still are unprofitable. He credits Iberia's recover), to "a very tough feasibility plan" that received buy-in from unions, shareholders, the government and suppliers in the middle of the last decade. The plan "set the conditions for medium- and long-term profitability of the company, and after 1996 we have been able to maintain this level of profitability."

The mid-1990s turnaround paved the way for privatization, which began in 2000 with the sale of 9% and 1% respectively to fellow oneworld members British Airways and American Airlines. Today the company's stock trades on the Spanish exchanges. The Spanish government retains 5.4% through SEPI, including until April 2006 a so-called golden share.

In order to remain on top, Iberia is in the midst of its Director Plan, which targets 350 [euro]-400 million [euro] in annual cost savings through 2005. …

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