Ash cloud turbulence takes toll on Cimber Sterling

Danish budget airline Cimber Sterling posted narrower losses for its 2010/11 financial year and said the financial crisis, Icelandic ash cloud and high fuel costs wiped out its capital.

The airline, which on Thursday got a 165 million Danish crowns ($31.8m) lifeline from Ukrainian investor and new majority shareholder Igor Kolomoisky, said on Friday it expected to reduce losses further in the 2011/12 financial year.

The group, a small rival to Scandinavian airline SAS and Norwegian Air Shuttle, narrowed its operating losses before special items to 200m crowns from 228m in 2009/10.

Revenue in the 2010/11 financial year to end-April rose 25 per cent to 1.94 billion Danish crowns from a year earlier, in line with the airline's own forecast.

Passengers carried rose by 26 per cent in 2010/11 from the previous year, and Cimber said it had half of the small Danish domestic market at the end of the financial year.

The tough business environment after the financial crisis, the Icelandic volcanic ash cloud that paralysed a large part of European airspace in May 2010, rising fuel costs and a rough winter, had hurt profits, Cimber Sterling said in a statement.

"Throughout 2010/11 we were forced to cut operating profit expectations and were in addition hit by not insignificant events," it said.

"The development was highly unsatisfactory, and at the end of the financial year it was clear that the company's equity capital was lost."

Tightened payment conditions, such as demands for payments in advance, guarantees and deposits from the struggling airline's partners hit Cimber's working capital, it said.

"It is, as the wording goes, expensive to be poor, and that has placed Cimber Sterling in a negative spiral," the airline said.

The airline forecast 2011/12 revenue would rise to 2.1bn crowns and that operating losses would be trimmed further to between 20m and 60m crowns.

The airline's new majority shareholder, Cyprus-based Mansvell Enterprises which is 75-per-cent-owned by Kolomoisky, recently bought Swedish regional airlines Skyways operating out of Stockholm, and City Airline operating out of Gothenburg.

It now holds about 70 per cent of shares in Cimber Sterling and has said it plans to create a regional Nordic airline.

Shares in Cimber Sterling fell 3.2 per cent by 1104 GMT against a 0.2 per cent rise in the Copenhagen bourse's benchmark index .