Europe's other major carriers suffer poorer first quarter results and a fall in capacity

Air France continues to buck the trend in European air transport, reporting a 12.5% increase in revenues and rising capacity as other carriers in the region are starting to suffer the effects of the economic downturn spreading from the USA.

Air France's capacity increased by 9.7% in the last quarter to the end of June. Passenger numbers rose 15% to 2.45 million as it benefited from the turmoil in the rest of the French airline sector. Load factors remained virtually static at 79%. Traffic figures for July continued the upward trend. Profit figures for the period have not been released but Air France estimates operating profits will show a slight improvement over last year.

By contrast, for its first quarter to June, British Airways' revenues fell slightly to £2.3 billion ($3.25 billion), compared with its French counterpart's €3.37 billion ($2.95 billion). But BA saw its operating profit decrease by 48% to £50 million ($70 million) and suffered a drop in traffic volume by more than 10%, although the company's strategy of concentrating on high-yield traffic stripped 8.6% of available seat kilometres capacity out of the network in the quarter. While most of the company's figures were going in reverse compared with last year the airline pointed to an increase in yields of 12.9% as vindication of its policy.

Rod Eddington, BA chief executive warns that while the figures for the summer are holding up reasonably well the real challenge will come this winter. No improvement in the economy is expected before mid-2002, he says.

Other European carriers are also succumbing to the downturn. Lufthansa is cutting capacity growth from 7% to 3% and has announced that it is to use smaller aircraft and cut frequencies on transatlantic routes. On Detroit, for example, it is swapping the Boeing 747-400 for an Airbus A340-300. It is also cancelling a number of unprofitable services to destinations in Brazil, Colombia and Uzbekistan.


The German carrier says that the reduction of capacity - equivalent to two 747s - is part of its strategic direction to reduce tourist routes to concentrate on the business traveller. The airline is forecasting operating losses this year and ostensibly blaming them on its costly pilots strike.

All airlines are citing high fuel costs and worsening economic conditions as negative factors in their performance. Among the worst hit has been SAS Scandinavian Airlines, whose half-year figures showed a profits slump to SKr180 million ($17.2 million) from SKr1.06 billion a year earlier.

KLM Royal Dutch Airlines is seeking to lessen the impact of its own weak first quarter figures, with a cost cutting programme, including capacity cuts and job losses designed to bolster the airline's finances. Its operating revenues fell to €23 million, compared with €100 last year.

Source: Flight International