Airline woes.

No sooner had the chairman of Iberia proclaimed that Spanish airlines had been hit the least by September 11, Spain's flag carrier yesterday announced a 75 percent drop in net profits to 50.2 million euros and the government announced that the airline is to be heavily fined. The Minister for Development yesterday said that Iberia is to be fined 137.030 euros (22.8 million peseta) for suspending its flights on July 13 last year because of security concerns during the SEPLA pilots strike. According to the Minister, Francisco Alvarez Cascos, there were not sufficient reasons for grounding planes; a decision which had serious implications for the country. There were also claims that Iberia failed to provide the industry with sufficient notice. Iberia chairman, Xabier de Irala, said that the decision was taken because there were grave concerns that the airline would not be able to guarantee maximum levels of safety on its flights because of the pilots' strike. News of the fine added further to the woes of Iberia's major shareholders who yesterday gathered for a general meeting. They were informed that Iberia's operating profit for 2001 fell to 4.9 million euros last year, from 65.8 million euros in 2000, which the company said was better than expected considering the impact of the U.S. hijacked plane attacks on the travel industry. In December Iberia said it likely it would report operating losses for the year of 24 million to 48 million euros. The company slashed capacity and announced plans to lay off 2'500 of its 29'000 workers in response to the attacks. “At first glance the results look positive considering what the company said in December,” said Joaquin Garcia-Romanillos, an aviation analyst at Banco Espirito Santo. At lunch-time yesterday the group's shares were down 0.8 percent to 1.21 euros. Revenues rose 5.5 percent to 4.74 billion euros while costs rose seven percent to 4.73 billion euros. Capacity, in terms of the number of passenger seats on offer, rose 7.7 percent while demand rose 3.3 percent. Iberia, which went public in April when the Spanish state sold its final 54 percent stake, saw business sag in the fourth quarter because of September 11, but passenger traffic figures showed some recovery towards the end of the year. Iberia's biggest shareholders include British Airways Plc BAY.L with nine percent and Spanish savings bank Caja Madrid with 10 percent. American Airlines owns one percent. The shares have gained 11 percent so far this year, better than the one percent rise in the leisure and travel sector of the Dow Jones European Stoxx index helped by improving prospects for the travel industry. They fell almost eight percent last year.


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