Mark Pilling: February 2007 Archives

Thank goodness for that, Air Berlin has made a profit.

After an initial public offering last May that, to put it mildly, didn't get off to a flying start, amid some financials that revealed the German scheduled/charter hybrid was somewhat lacking on the profitability front, Air Berlin is feeling rather pleased with itself, reporting that it is now in the black: To the tune of €50 million ($66 million) at the net level.
This is on revenues of €1.57 billion in 2006, a tidy rise of 28.6% over 2005. Operating profit was €64.1 million.
Some critics are already pointing to some clever treatment of tax to create the positive result. More on this will come out after the airline's annual general meeting at the end of March.
Following that, Airline Business will examine the airline's past, present and future with its founder and chairman Joachim Hunold. Most probably in our May issue.

On the face of it Spanish low-cost carrier Vueling Airlines (pronounced "welling" I am reliably informed) is doing pretty well, turning in an operating profit of €28 million ($36.8 million) for last year.

Not bad for only the carrier's second full year of operations, and a big improvement on a €1.6 million operating profit in 2005. This is a creditable performance for a start-up of any kind. It's also not bad in a country that has seen low-fare competition go from a cosy Iberia dominated scene just a few years ago to one of Europe's most fiercely competitive markets. EasyJet is a big player in Spain and Ryanair is bolstering its presence too.
Close watchers of airline financials will be keen to see the hear and see the full picture from Vueling. It was hoping to more than double its revenues to €260 million in 2006, but fell short by €25 million. Perhaps that tough competition is beginning to bite?
Barcelona-based Vueling says it has a cash in the bank of €136 million after a successful initial public offering in Spain in December. Some of this cash will be used to open a base outside Spain (its third) and to buy up to 40 aircraft.
The carrier carried 3.5 million passengers in 2006 to 41 destinations with 16 aircraft. Revenues are forecast to rise to €425 million plus.

Those northern raiders from Iceland are at it again. Fresh from forays into the shareholdings of Finnair, easyJet, Icelandair and Sterling Airlines, FL Group is now setting its sights on America.
American Airlines to be precise. The Icelandic investment company has revealed that its shareholding in the US major has jumped to a significant 8.63%. That makes it the biggest single shareholder in the company it believes.
"We have been following the airline industry in the United States and we believe AMR Corporation (the parent of American Airlines) presents strong prospects for 2007," said FL Group chief executive Hannes Smarason yesterday at its annual general meeting.
The strong recovery strategy being pursued by American, led by its award-winning CEO Gerard Arpey, is clearly being closely watched by the investment community. Only a few days agorumours surfaced that another group, supposedly including Goldman Sachs and British Airways was sniffing around American.
There will be some sharp eyes on American's stock price over the coming days and weeks.

Personnel Today magazine described it as one of the most challenging human resources jobs in the UK. The position to be filled: HR director of British Airways.
In the most normal of times, whatever counts for normal in airline business, this is not only a big role in UK terms, but a big role in industry terms.
In today's high-octane business climate, and with the many challenges BA faces in its industrial relations, it is a hugely important appointment for the carrier.

The ever entertaining Dr VJ Mallya, founder and chairman of Kingfisher Airlines, was in London yesterday giving an address to the Aviation Club.
His first task was to explode a misconception about his home country that it is a poor, emerging nation. Not quite true, says Mallya, typically talking without notes. India is "incredible", he says. "India has always been an exceptionally wealthy country," he says, with huge natural resources and a long history of royal dynasties where huge wealth was taken for granted.

Per capita income for millions is also not as low as some might think. There are some 100 million people that have the earning power equivalent to those in Europe or the US, says Mallya.
Now India is forging ahead. "What is new is that we have broken loose of the shackles of our socialist economy to free and global market integration," says Mallya. "This is unleashing a power always resident in that economy but never allowed to flourish."

It is against this background that Mallya launched Kingfisher Airlines 21 months ago. Now it flys 24 aircraft on 156 flights a day, with another 20 arriving in 2007. This Indian entreprenuer, millionaire and member of parliament, did not take the low-cost airline route for his airline. Mallya believes low-cost and India do not sit well. He believes that high fuel taxes and airport parking charges, along with airport and air traffic control congestion that makes short turnarounds difficult, means following a low-cost model in India is tough. "That's why I say there is no room for a low-cost carrier in India because there is nothing low cost about running an airline in India."