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Aviation History
1995
1995 - 0301.PDF
BUSINESS BA and KLM turn in impressive performances to end 1994 KEVIN OTOOLE/LONDON BRITISH AIRWAYS and KLM continue to set the pace for the European airline industry with fur ther strong performances in the December quarter. A leap in profits at BA for the last three months of 1994, has the air line on course for a record perfor mance for its full financial year to March 1995. After nine months BA had notched up net profits of £332 million ($529 million) BA chairman Sir Colin Marshall believes that the outlook for 1995 "...remains encouraging" but goes on to warn that "...price competition in the industry con tinues to be intense". Passenger yields fell marginally during the quarter, despite another 6% growth in premium traffic to fol low the 11 % rise posted in the previous quarter. BA also repeats its warnings that it may have to write down the value of its $400 million holding in USAir unless its partner man ages to negotiate a cost-cutting agreement with its unions. Marshall still expects benefits from the code-sharing alliance to be in the region of $100 million over this financial year and points out that, despite heavy losses, USAir exceeded expectations with a $450 million year-end cashflow. The combined losses at European subsidiaries TAT and Deutsche BA edged up in the December quarter, but BA again says that this was offset by the bene fit of feed traffic into its own system. KLM also saw profits leap in the quarter, giving it net profits of DF1559 million ($330 million) for the first nine months of its year. The final quarter through to March is expected to produce a small deficit, however. The Dutch carrier says that it is benefiting from its transatlantic alliance with Northwest Airlines as well as an upturn in the global economy. Although KLM saw declines in both passenger and cargo yields, the group's unit costs have also been falling throughout the year. BA, too, expects to achieve tar geted cost Marshall warns on price competition ner Air UK. The UK regional, in which KLM holds a 15% stake, swung back to a pre-tax profit of £2.65 million for 1994 and report ed a 19% growth in passenger numbers, to 2.6 million. More than one-quarter of Air UK's traffic was carried to Amsterdam Schiphol, where about 40% of passengers connect with KLM international flights. • Scheduled passenger performance December quarter 1994 Airline Traffic (RPK) 1994 change BA 20,835 7.0% KLM 10.013 10.1% Capacity (ASK) Load factors Yield change 1994 change c/RPK change 3.6% 69.6% 2.2pts $10.20 -0.2% 3.1% 71.1% 4.5pts *8.22 -2.8% savings of £150 million in the current financial year. KLM had further good news from alliance part- Financial performance December quarter 1994 Revenues (Sm) 1994 change British Airways 2.596 8.3% KLM 1.338 7.3% Pretax profit/loss (Sm) 1994 64 77 1993 41 4 Current exchange rates: $1= £0.63 DFI1.69 NEWS IN BRIEF m CRASH PENALTY Taiwanese flag carrier China Airlines warns that 1994 prof its have plummeted because of its Airbus A300B4 crash at Nagoya in Japan in April 1994. Pre-tax profits are expected to fall to around NTS500 million ($19 mil lion), down from NTS3.44 billion in 1993. Provisional figures reportedly indicate a 13% drop in revenues, to around NT$40 billion. • CONTINENTAL RATING Credit ratings for Contin ental Airlines are under review, following concerns about the carrier's losses and difficulties with its low-cost Continental Lite operations. New York rating agency Moody's says that it is review ing $1 billion in debt in the light of continuing losses. Air Inter battles for French leadership GILBERT SEDBON/PARIS AIR INTER HAS SWUNG back into profit for the first time in four years, but the carrier warns that it is preparing to defend itself against savage com petition expected in the French domestic market. Air Inter posted a net profit of Fr21 million ($4 million) for 1994, marking a turnaround from the Frl85 million loss forecast a year ago (Flight International, 8-14 February). "Within the next two years, we must prove our worth, on the home front and abroad," warns chairman Michel Bernard, however. UK air lines, led by British Airways and its French partner TAT, have already won access to Air Inter's main hub at Paris Orly, with others such as Lufthansa, KLM and Lauda Air due to follow. "As far as I am concerned, TAT has ceased to exist and we now have to deal with the might of British Airways," says Bernard. He adds that BA has launched a strong attack on the business- travel market. Air Inter is also fighting to hold its own against competition from private French carriers such as AOM, Air Liberte and Euralair, says Bernard. Within the next three years, Air Inter expects to lose one-third of its domestic traffic, but hopes to compensate through new routes to Spain, Portugal and North Africa, as well as through lower costs. Bernard has called for a wage freeze and a 10% productiv ity improvement from the carrier's 11,000-strong workforce. Bernard says that the average Air Inter fare is now about Fr600. "To beat that, our competitors must go down to Fr400 and we doubt if they will succeed. In due course, some carriers will have to fall out," he says. At the same time, Air Inter is fighting a tough internal battle within the Air France group to position itself to take the lead in a new European operation, which is due to swallow up the group's domestic and regional services. The plan was revealed in 1994 as part of the group's three-year restructuring programme, but will not be launched until 1997, when the French carrier has received the last of its Fr20 billion in state aid. The European Commission imposed constraints on Air France in return for allowing state aid, but these have not been applied to Air Inter. Although Air Inter is 72% owned by the French flag carrier, Air France argues that it will con tinue to be operated as an indepen dent carrier. "We are now fighting with our own resources and mapping out our own strategy," says Bernard. • FLIGHT INTERNATIONAL 15 - 21 February 1995
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