 Iberia reported a consolidated loss reported of €16.4 million in the third quarter, €47 million lower than the loss obtained in the previous quarter.  This is an improvement on the results recorded in the two previous quarters.

 Operating revenues fell 19.6%, in line with the performance seen in the first nine months of the year, and as a result of the generalised decline in air traffic, which had a stronger impact in the business traveller segment.

 The load factor stood at 82.1%, down 1.1 p.p. on the previous year. The sharpest decline was observed in the intercontinental sector, with the load factor in the European and domestic businesses rising significantly compared to the third quarter of 2008.

 Yields fell by 13.8%, an improvement on the second quarter (-17.1%), although figures still reflect the significant weakness of air traffic.  While the reduction in traffic appears to have bottomed out, demand is extremely price sensitive, especially in the long-haul segment.

 Iberia continued to implement capacity adjustments, with a reduction of 4.8% in ASK. At the same time, adjusting its staff and fleet to this new scenario has allowed the company to maintain its levels of productivity per employee (-0.8%) and significantly improve its fleet utilisation (+ 4.7%).

 Along these lines, unit costs (ex-fuel) have been slightly reduced (-0.8%) and fuel costs have fallen substantially, both in terms of total costs (-34.1%) and unit costs (-30.8%). Overall, unit cost per ASK declined 10.6%, the sharpest fall so far this year.

 In July 2009 the merger of the two airlines, Vueling and Clickair, was completed. Iberia retains a stake of 45.85% in the merged company.  The merger has created a capital gain of around €20 million for the company.

 The Iberia Group’s financial position remains sound, with equity increasing by 1.2% since year-end 2008, putting the gearing ratio, measured in terms of net debt to total capital employed, at 42.5%.

 British Airways and Iberia’s boards have yesterday agreed a binding memorandum of understanding (MoU) setting out the basis for a proposed merger of the two companies to create a new, leading European airline group that recognises the principle of parity at board and management level.

The proposed merger will result in the creation of a new holding company (TopCo) that will own both the existing airlines and whose shareholders will be the current British Airways and Iberia shareholders. Under the terms of the proposed merger, British Airways shareholders will receive one new ordinary share in TopCo for every existing British Airways ordinary share held by them and Iberia shareholders will receive 1.0205 new ordinary shares for every existing Iberia ordinary share held by them. On the basis of this exchange ratio, and after cancellation of the treasury shares held by Iberia and prior to the cancellation of the cross-shareholdings held by British Airways and Iberia in each other, British Airways shareholders will hold 55 per cent of TopCo and Iberia shareholders will hold 45 per cent.

The merger is expected to be completed in late 2010.

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