Vueling 2011 profits soar, expects to benefit from consolidation

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Spanish low-cost carrier Vueling plans to take advantage of further industry consolidation to grow its capacity by up to 25% this year, after seeing its full-year net profit surge 40% to €10.4 million ($14 million) in 2011.

The Barcelona-based carrier was quick to step in and mop up routes vacated by the collapse of Spanair in late January, and chief executive Alex Cruz expects to benefit from further consolidation going forward.

"I can't see how the market will continue with current fuel prices without further consolidation and we plan to take advantage of that," Cruz told analysts today during a conference call to discuss Vueling's 2011 results.

The airline is about to issue a request for proposals to renew its fleet and expects to make a decision in June or July, said Cruz. In the meantime, the carrier is "seeing an opportunity to have access to cheaper leases" on aircraft of a "reasonable" age.

Vueling is looking to place an order for about 30 new aircraft and while it currently operates an all-Airbus fleet, "we have just come back from Seattle, where we have been talking with Boeing", said Cruz.

The airline saw its revenue increase by 8.4% in 2011 to €863.5 million. Earnings before interest and tax (EBIT) declined to €11.4 million from €48.7 million a year earlier, mainly as a result of a 40% increase in fuel costs.

Vueling has hedged 50% of its fuel for 2012 at $1,000 per tonne. It is aiming to reduce costs by €14.2 million this year.

Capacity in 2011 grew 5.5% while passenger numbers were up 12%. Load factor rose 2.4 percentage points to 75.6%.

The airline will grow ASKs by 20-25% this year, including a 28-33% growth in the domestic market and a 30-35% growth in the international market.

Vueling aims to sign between two and four new interline agreements with other airlines in 2012 and will "give priority to Oneworld" carriers, said Cruz.

The carrier saw the number of transfer passengers at Barcelona increase by four times in 2011 versus the previous year, which Cruz believes "proved we can profitably be a hub feeder".

In the fourth quarter of 2011, Vueling saw its revenue increase by 5% to €176.1 million on a 4.9 percentage point improvement in load factor to 76.6%.