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Aviation History
1998
1998 - 1580.PDF
Business Airline comeback disguises Asian crisis KEVIN O'TOOLE/LONDON AIRLINE PROFITS re bounded strongly to near re cord levels last year, says the International Air Transport Assoc iation (TATA), but director general Pierre Jeanniot again warns that margins remain too low and that the headline figures disguise the crisis still unfolding in Asia. The detailed figures, issued in the latest IATA annual report, confirm that airlines earned a net profit of $5 billion on their interna tional scheduled services in 1997, recovering most of the ground lost during a weak 1996. Corporate results, which include thriving US domestic- operations and non-airline busi nesses, recovered more decisively, with net profits leaping to $7.2 bil lion after hovering around the $4 billion mark lor two years. Jeanniot cautions, however, that, although the latest results represent a fourth consecutive year of profits, the industry as a whole is still SHOO >iWtlAhAlt|a;l:lHIHiKgJ:MHJ?Ma;l,!Ja;;i7Tr^ International Domestic Traffic (RPKbn) Capacity (ASK bn) Load Factor 1997 1,416 2,020 70.1% change 7.2% 6.1% 0.7pt 1997 949 1.378 68.9% change 4.6% 2.6% 1.3pt 1997 2.364 3.398 69.6% change 6.2% 4.7% l.Opt TOTAL million short of recovering the loss es made on international routes over the preceding recession. He adds that the overall result masks the crisis among Asian carri ers, which had "probably their worst ever" year in 1997. "Intense competition and yield dilution has occurred among carriers where restructuring had hardly begun and alliance activity is in its infan cy," Jeanniot says. While half'of the $5 billion profit came from the Americas and another S2.2 billion from Europe and the Middle East, the returns from Asia stood at only $300 mil lion. Financial analysts believe that there could be worse to come over the next year if the region fails to shake off the downturn. IATA has already warned that the crisis in the Asia-Pacific region UMV,W,Uhih\UW%M\ 1993 Sales 216.9 Operating margin -0.2% Pre-tax profit -4.1 Net corporate -3.8 im MliNMUMil 1994 231.0 2.2% 1.6 1.1 AWN 1995 253.1 3.5% 5.2 4.0 mimfM 1996 265.4 2.3% 3.0 4.2 1997 272.9 3.0% 5.0 7.2 NOTE Figures are for IATA members reporting for scheduled international operations except net corporate which represents net profits including domestic and non-aviation is likely to wipe $2 billion off net profits this year, taking the world total to below S4 billion. Passenger growth forecasts for the region have been slashed from 7.7% to 4.4% a year through to 2001. Jeanniot also notes that the 1997 profits represent a margin of only around 3% when Western econo mies and air markets are booming. Eoad factors climbed to above 70% on international passenger services, backed by a 7.2% rise in traffic, while aircraft were virtually as fill I on domestic services. Although international yields slipped again, by 2.7%, some of the dip was made up with a 2.2 % fall in unit costs per available tonne kilo metre. Besides expected gains from the dip in fuel prices, efforts to increase productivity and utilisa tion appear to have come good, with a 3% drop in the cost of cock pit crews and even stronger savings in aircraft leasing and administra tive overheads. Air traffic charges were the only area in which costs continued to rise, with en route charges up by nearly 6%. 3 NEWS IN BRIEF • CHC TO FLOAT OVERHAUL Canada's CHC Helicopter plans to float all its repair and overhaul operations, to be separated into a separate division as Vector Aerospace. The helicopter operator expects to raise C$192.5 mil lion ($132 million) from the public offering. It will initial ly retain a 20% stake, but plans for this to be sold if the new shareholders take up rights to buy it out. • QANTAS BUYS AIR PACIFIC Qantas has finalised a deal to raise its stake in state-owned Fijian flag carrier Air Pacific from 17.5% to 46%, building on last November's 10-year strategic co-operation pact to exploit tourist potential in the South Pacific. The two airlines code share between Fiji and Australia and to Los Angeles and Honolulu. Fiji will retain 51% of the airline. IAI president calls for change to help alliances OWNERSHIP OF state-held Israel Aircraft Industries (IAI) will have to change if it is to form strategic alliances with other aero space companies, says president Moshe Keret. "It is too early to talk of a US company taking an equity stake in IAI. A lot of work has to be clone inside Israel first," he says. Using the gradual privatisation of Israel's telecommunications sec tor as an example, Keret says: "It will not be an overnight revolution, rather an evolution which could start next year." The process could begin, he says, with a stock offering. IAI has joint ventures with com panies outside Israel, involving specific products or markets,"... but it is difficult to do more as a govern ment-owned company", Keret savs. "A strong driver to change the own ership is to enable IAI to participate in international programmes, acquisitions and spin-offs, in the USA and elsewhere," he adds. It is too early to say how an own ership change would be achieved. Keret says, as the Israeli Govern ment "is not set up" to privatise IAI in one step. Although he ".. .cannot indicate when and how, there definitely will be a change...we have to prepare ourselves for the next century". IAI, meanwhile, could reach its goal of hitting the $2 billion sales mark in 1999, a year earlier than planned. Sales were up by 15% to $1.7 billion last year and the com pany moved out of the red for the first time in five years with a net profit of $24.3 million. Keret expects sales to be up by about 10% this year, to close to $ 1.9 billion. IAI has reported a $10 mil lion net profit for the first quarter. The company's firm order back log, wh ich grew by 2 5 % last year to a record $3.2 billion, is also forecast to increase this year. The propor tion of non-defence sales is expect ed to go up from the 1997 level of 35%, which beat IAI's 1993 com mitment to boost commercial rev enues to 20-30% of the total within four years. • Keret: "It's difficult to do more as a Government-owned company " FLIGHT INTERNATIONAL June 17 - 23 1998
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