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EasyJet Will Close Madrid Base as Profitability Suffers in Spain

Source: Bloomberg - Wed 20th Jun 2012
 EasyJet Will Close Madrid Base as Profitability Suffers in Spain

EasyJet, Europe's 2nd largest budget airline, will stop basing crew and aircraft in Madrid starting this winter as overcapacity and high airport charges in Spain curb profitability.

Profit from EasyJet's Madrid operations is below that at its other bases, the company said today in a statement. "This is due to a combination of overcapacity in the Spanish airline market, leading to low revenue per passenger, combined with high airport charges which have more than doubled in the last 2 years," Luton, England-based EasyJet said.

Spain's government is battling to reduce its debt as the recession deepens, pushing unemployment above 24%. Barcelona-based Spanair SA in January became the first scheduled European carrier to fold since the last recession as the EU's highest jobless rate clipped traffic and the Catalonia government said it would no longer supply funds.

Easyjet will reduce capacity to Madrid by about 20% in the next financial year and to Spain as a whole by 7%. Total capacity will increase by about 5% in the 12 months ending Sept. 30.

International Consolidated Airlines Group SA (IAG)'s Spanish unit Iberia started a lower-cost division in March in an effort to stem losses on short-haul trips. Iberia posted a 170 million- euro loss in Q1.

Should they remain at current levels, this year's lower fuel prices will offset any restructuring costs, EasyJet said.

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