Iberia to lauch low-cost airline

This could end up getting messy. Where are the aircraft going to come from? Maybe older Iberia A320’s and MD-80’s? I wreckon they’re a bit too late coming into the game and should get involved with Vueling.

Iberia launch takes on low-cost rivals

By Leslie Crawford in Madrid
Published: 26/4/2006 | Last Updated: 26/4/2006 16:55 London Time

Iberia, the Spanish flag carrier, will launch a low-cost airline in October to compete with rivals such as EasyJet, Ryanair and Air Berlin, low-cost carriers that have cornered almost one-third of airline travel to Spain.

Iberia said on Wednesday its low-cost offshoot – yet to be named – would be based in Barcelona, the destination of 40 per cent of low-cost flights to Spain. Iberia will contribute €24m ($30m) to the new airline’s €50m in start-up capital.

Four domestic partners, including ACS, Spain’s largest builder, and Quercus, a private equity fund, will provide the remaining capital.

A survey published this week by the Institute of Tourism Studies in Spain showed that low-cost airlines brought 1.2m passengers to Spain in the first quarter of 2006 – 31 per cent of the total – and a 6 per cent increase over 2005.

Traditional airlines, by contrast, have lost market share.

“We cannot leave this important market to our low-cost rivals,” Iberia said.

Iberia said the new airline might seek a public listing in three to four years, depending on its financial performance. It will initially have five aircraft, building up to 30 by 2008.

The new company is seeking slots in Europe, particularly in Germany and the UK, and will be attending a global auction of landing slots to be held in Vancouver in June.

Iberia said the new low-cost carrier would be a stand-alone company with independent management, “so as not to contaminate the new airline with Iberia’s higher cost structure”.

Nevertheless, the launch of a Barcelona-based low-cost carrier is expected to allow Iberia to concentrate on its Madrid hub and its most profitable routes, especially long-haul flights to the US and Latin America.

Iberia said it would keep flying to European destinations, as they were important feeder routes that brought passengers for its long-haul flights.

One quarter of Iberia’s long-haul passengers come from outside Spain. But the company said it would gradually eliminate its non-profitable domestic routes to cut costs.

From: FT.com
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