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Aviation History
2003
2003 - 0090.PDF
BUSINESS RESULTS No relief yet in sight for US carriers US airlines are expected to report industry-wide fourth- quarter net losses of more than $2 billion this week. Carriers and analysts are also warning of continuing tough conditions this year, and estimate for 2003 full- year losses widening to $4.5 billion from previous estimates of around $3 billion. Continental Airlines and Delta Air Lines reported first, and as Continental chief executive Gordon Bethune says: "The results are nothing to cheer about." Delta posted a $365 million fourth-quarter net loss com pared to $734 million in the 2001 fourth quarter. Its full-year losses were essentially flat at $1.2 billion. Continental's fourth-quarter net loss narrowed to $109 mil lion compared with $149 million a year ago, but its full-year net loss was $451 million compared to $95 million. Neither carrier expects to see a profit in 2003. American Airlines, Northwest Airlines and Southwest Airlines are among the rest of the majors reporting their results this week, with only low-cost Southwest expected to be profitable. JP Morgan senior analyst Jamie Baker underscores the gloomy prospects for 2003. "The year is likely to be defined by war, continued downward pres sure on wages and a new fare structure," he says. He believes, however, that no other major carriers will join United Airlines and US Airways in Chapter 11 bankruptcy pro tection. "It is unlikely in our opinion that bankruptcy courts will get any busier than they already are," he says. United is now concentrating on its reorganisation plan and ultimate emergence from Chapter 11. The carrier has secured temporary pay cuts that will save the airline $70 million a month and allow it to meet criti cal debtor-in-possession (DIP) funding commitments. NETWORKS BRENDAN SOBIE / WASHINGTON DC Regionals flourish as US majors continue to suffer In bid to stem losses mainline carriers hand over unprofitable routes to low-cost partners US regional carriers are flourishing in the face of the financial woes felt by the country's majors, as full-year traffic figures show. Mainline carriers are handing routes over to lower- cost regional partners, sustaining sales of regional jets and changing the shape of the US airline network. The top 10 US regional carriers have all reported double-digit traffic increases for 2002, with average growth exceeding 30%. The top six majors, meanwhile, all handed over unprofitable routes to their regional partners. As a result, while the over all US fleet size has barely changed, regional jet aircraft numbers have risen by 27%. Total domestic traffic fell 3.8% (see chart). The introduction of new 70-seat regional jets into networks of four US majors has sped up this trend. Regional jet operator Trans States Airlines took over all American Airlines flights in three St Louis mar kets late last year and plans to take over several more in the first half of 2003. Sky West Airlines took over two United Airlines routes at San Franci sco this month, and Atlantic South east Airlines is taking over two routes in April from parent Delta Air Lines. Aircraft such as the new long- range version of the 50-seat Embraer ERJ-145 are also being used to launch routes in the 800-2,200km range. The US Regional Air Service Initiative (RASI) says at least 80 such routes were added in 2002. Regional jets are also being intro duced in small communities across the USA as turboprops are retired. RASI says US regional jet operators now serve 233 airports, 13% more than a year ago. According to Federal Aviation Administration data, regional jets now account for about 160,000 flights a month - 20% of all scheduled US flights, and 80% more than in 2001. US REGIONAL JET FLEtTS AND TRAFFIC GROWTH IN 2002 Atlantic Coast Airlines Atlantic Southeast Airlines Air Wisconsin Chicago Express SkyWest Airlines SkyWay Airlines Mesa Air Group ExpressJet Horizon Air American Eagle Pinnacle* US regional jets Total US airlines -3.8**B -10 O 30 T 60 , 90 Percentage • Airline traffic growth (revenue passenger kilometres) % r~l Regional jet fleet growth (aircraft) % Active regional jet passenger fleet with up to 100 seats. * January-November 2002 only. " US domestic traffic FL/GH1 Sources: Airclaims CASE database, Air Transport Association, airlines. ^•SSSSSSSSSS^^ CONSOLIDATION CHRISTINA MACKENZIE / PARIS Thales focuses on balancing books Thales is likely to concentrate on improving its balance sheet rather than seeking acquisitions during what it will predicts will be "extremely difficult" years ahead. Chief operating officer John Hughes says the company will concentrate on core businesses rather than look ing for major expansion in North America. "If the opportunity were to come along [to make an acquisi tion] we'd take a look, although we are not in a feeding frenzy," he says. Hughes, who also heads the aero space business area, adds that this does not rule out organic growth of existing divisions. "Our organic activities will continue to grow," he says, notably in North America. "We have a very good, long-term relationship with Bombardier fol lowing investments in Quebec, so that we could be close to them," and he hints that similar action could be taken to develop a better relationship with Boeing. "We are delighted by our rela tionship with Airbus," says Hughes, "but we'd like to do more business with Boeing so it's not unreasonable to suppose we'll do things to achieve this." Thales' debt appeared worryingly large in 2002 after it added €332 million ($350 million) net debt in the first half of the year, including €110 million in acquisitions, bring ing total net debt to €1.8 billion on 30 June. Since then, the company has sold four business groups including aeronautical services. After analysts expressed concern last month that the company was still debt-heavy, it also sold property worth €206 million. 20 21-27 JANUARY 2003 FLIGHT INTERNATIONAL www.fliqhtinternational.com
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