Vueling to continue international growth from Barcelona

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Vueling will continue to drive its international expansion from Barcelona airport as the Spanish low-cost carrier deals with a continuing slump in domestic traffic.

International traffic from Barcelona now represents 51% of its business from the Spanish capital compared with 47% at the end of the second quarter of 2011.

Vueling expects to take advantage both of its strengthened leadership and higher market share at Barcelona and of greater market consolidation, it says. The carrier has 30% market share in Barcelona, up from 22% this time last year.

"We improved our leadership in Barcelona and we will continue to invest there," chief executive officer Alex Cruz said during a 1 August conference call with investors.

Cruz says Vueling's year-on-year growth was particularly strong in France, where the carrier grew its operation by 34% as well as Russia, where capacity was increased by 46%.

Vueling also expects to take advantage of the positive performance of the new markets opened up during the first half of this year.

"We are developing new north to south markets in Europe and added Scandinavia and Germany to our network in the first half. We plan to continue this strategy in 2013," he says.

Domestically, Vueling grew 9% in the first half, mainly by taking over routes vacated by the collapse of Spanair.

Cruz expects domestic demand to be dampened by the recent increase of VAT implemented by the Spanish government, as well as the rise in passenger taxes at airports run by AENA.

"Demand will be affected by the overall situation in Spain. We hope the government will do something about it, although we don't expect anything over the next few months," he says.

Despite this, Vueling is sticking its plan to increase capacity by 20-25% in 2012.

Cruz says Vueling has also grown its cost reduction target by €3 million ($3.7 million) after generating €8.1 million in cost savings in the first half, with €6.3 million achieved in the second quarter alone.

The cost-saving programme implemented by the company at the beginning of the year initially envisaged a total of €14.6 million in savings for 2012. It has now been increased to €17.7 million.

"The conditions remain tough but we believe we have the right formula to close the year with a positive EBIT," Cruz says.