Heavy turbulence for Cimber Sterling

Troubled airline admits steeper than expected losses, just as Ryanair stakes larger claim to domestic airspace

December 15th, 2011 11:57 pm| by admin
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Cimber Sterling announced on Thursday that losses for 2011/2012 would be three to ten times greater than previously expected. Instead of losing between 20 mllion and 60 million kroner, the shaky commuter airline now predicts it will lose between 160 million and 200 million kroner before taxes for 2011/2012.

All told, losses will top 750 million kroner for the past three years. Meanwhile, share prices have nearly bottomed out. Cimber Sterling was listed on the Copenhagen Stock Exchange in December 2009 at a disappointingly low-altitude share price of nine kroner. Two years later, shares are going for around 1.25 kroner.

Managing director Jan Palmér pointed to the renewed economic uncertainty beginning last summer as a major reason why losses would now be much heavier. Fears of a new recession have been weighing heavily on ticket sales.

However, Cimber SterlingÂ’s executives also confessed that the company had made a strategic mistake in acquiring a fleet of Boeing 737s and focusing too much on getting into the longer distance market, reports Jyllands-Posten.

Instead, the company now intends to go back to its roots – which stretch back to Sønderborg in 1950.

The airline plans to phase out the Boeing 737s and refocus on smaller planes: turbo-props and a new line of jets that seat just 80 passengers. The airline will then concentrate on its shorter, regional flights, with an emphasis on routes out of Billund, Aalborg and Aarhus in Denmark, and out of Gothenburg and Jönköping in Sweden.

Cimber Sterling owns 46 planes now, including ones acquired through a recent merger with Skyways. But the company expects to increase its fleet by 15 to 20 smaller turbo-props and jets over the next two to three years.

Palmér said that Cimber Sterling’s majority shareholder, the Ukrainian billionaire Igor Kolomoisky, had promised to continue capitalising the airline, despite ongoing losses. Kolomoisky has plunked down millions of kroner into Cimber Sterling several times over now. He will likely have to do so again, to keep the struggling airline alive, reports Jyllands-Posten.

In related news, the Ireland-based discount airline Ryanair announced this week that it is establishing a new headquarters at Billund, beginning in March, 2012.

With its new ‘Ryanair headquarters’ status, Billund Airport will get some 100 permanent jobs and two permanently stationed airplanes, that will use the airport as their home base, reports Politiken newspaper.

In addition, Ryanair will open five new routes from Billund to Carcassone, Korfu, Krakow, Venice, and Zadar, as well as an additional route from Aarhus to Palma de Mallorca, beginning at the end of March.

Ryanair expects to fly at least 800,000 passengers a year from Billund, but hopes to increase that number to as many as two million a year within six years.

Ole Kirchert Christensen, of the Travelbroker travel agency, told Politiken that Ryanair’s foothold and expansion in Billund would almost certainly “keep other operators away, because they won’t want to fly in direct competition with Ryanair”.

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