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Aviation History
1998
1998 - 0077.PDF
Olympic tackles management problems JULIAN MOXON/PARIS OLYMPIC AIRWAYS is step ping up efforts to resolve its latest management problems in an attempt to unblock its final tranche of state aid and to prepare the air line for the pending liberalisation of the domestic Greek air market. The state-owned carrier lost another president in late December and attempts to appoint a replace ment have failed, reflecting what a senior airline source says are "polit ical difficulties" between the Government and Olympic Air ways' management. "We have a very limited time in which to become much leaner and more efficient," says chairman Jordan Karatzas, who is handling the running of the airline. He is "very anxious" to see dirough the programme of planned cost-saving and revenue-increasing reforms called for in a recent study by an outside consultancy. In July, Greece will liberalise its internal air-transport market, while passenger ground handling at Athens Airport has recently been opened to competition. "I'm not panicking, but I'm certainly wor ried," says Karatzas. The Goldair Handling consortium, combining Long-term plans exist to replace the A 300B4, but resolving management problems will come first Frankfurt Airport, KLM and Luft hansa with Greek aerospace organ isations Aegean Aviation, Goldair and Plotin, is likely to be the sole bidder for the passenger ground- handling contract and says that it also plans to tender for the forth coming ramp-handling contract. At the same time, the Greek Government is withholding Olympic's final tranche of state aid, worthDr35 billion ($123 million), until the management issues are resolved (Flight International, 27 August-2 September, 1997, P7). Karatzas says diat the block on state aid will have no effect on the contracts signed for four Airbus A340-300s and eight Boeing 737- 800s, due for initial delivery at the end of 1998 and the first'half of 2001, respectively. "But it means our fleet and restructuring plans are on the backburner for the time being," he adds. In the longer term, the airline wants up to ten A340s and 25 737s to replace its Airbus A300B4sandBoeing727sand737- 200s. "We're looking at hushkitting the 737s and keeping the A300s for longer," Karatzas adds. The report says that revenues and costs could both improve by 20%. "But we need a period of sta ble management before that could happen," says Karatzas. Olympic's financial health has been steadily improving, with early estimates for 1997 putting net profits at Drl4.4 billion on sales of Dr270 billion. In 1996, net profits reached Drl 1.2 billion as the airline put behind it years of losses. Passenger traffic increased by about 9.4% in 1997, with load factors edging up to 65.7%, while employ ee productivity grew by 7.8%. iYIeanwhile, Olympic is close to starting a codesharing deal signed with Trans World Airways, initial ly between Xew York Kennedy Airport and Athens. TWA with drew its own Athens feeder services in early 1997. • Air France profits roll but alliances come under EC scrutiny AIR FRANCE'S transatlantic alliances have become the lat est to come under scrutiny by the European Commission (EC), aldiough die French flag carrier is pressing ahead with its expansion, buoyed by its recent financial turn around and the prospect of a pri vate cash injection. Regardless of the EC inquiry, Air France will not be able to realise the full benefits of its alliances with Continental and Delta Air Lines until a Franco-US bilateral agree ment, leading to a full open-skies accord, is reached. A new round of talks is tentatively set for February, following the breakdown of nego tiations in December, mainly on the timetable for die introduction of full liberalisation. The French carrier has told the EC that initial harmonisation will be limited to joint operations at Paris Charles de Gaulle, die shar ing of frequent-flier programmes and passenger perks. Key elements such as codesharing, joint schedul ing and marketing will also come under EC scrutiny, aldiough their introduction remains uncertain. Air France is pushing to speed the bilateral negotiation process and president Jean-Cyril Spinetta has outlined aggressive plans to help the airline catch its major competitors. His efforts received a boost at the end of 1997 with the unveiling of a near-threefold in crease in net profits for the first half of the Air France group's current financial year. The group results, which are die first since the airline re-emerged from its three-year restructuring in April 1997, showed a net profit of Frl.76 billion ($296 million) over the six months to the end of September. Also for the first time, die group figure includes die strug gling regional arm, Air France Europe (formerly Air Inter), which was officially merged into the main airline group in September 1997. A year ago, the group had man aged a half-year profit of only Fr597 million and then sank to an overall loss ofFr268 million for die full 1996/7 year after heavy losses from Air France Europe in the weaker second half. This time around, the group hopes to break even over the rest of the year, which would still leave it well ahead of earlier promises of a 1997/8 net profit of Frl billion. Airline financial analysts were impressed at die apparent extent of die turnaround. "There seem to be some genuine operational improve ments," says Chris Aver)', at Banque Paribas, pointing to underlying improvements in yields and rela tively restrained cost growth. Although traffic was up only marginally, growing by some 1.6% for passenger services and 6.4% for cargo, the rise in fares helped to keep revenues growing by more than8%, to Fr31 billion. The yield increase was in part caused by the strength of the US dollar, although Avery points out that this still leaves perhaps half of the increase accounted for by an underlying improvement. Air France says that die sales rise "...primarily stems from a more selective approach to traffic". Seat capacity fell marginally over the six months, helping passenger load factors to rise above 76%. J FLIGHT INTERNATIONAL 14 - 20 January 1998 23
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