Kevin O'Toole/LONDON

BRITISH AIRWAYS and KLM continue to set the pace for the European airline industry with further strong performances in the December quarter.

A leap in profits at BA for the last three months of 1994, has the airline on course for a record performance 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 continues to be intense". Passenger yields fell marginally during the quarter, despite another 6% growth in premium traffic to follow 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 manages 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 benefit of feed traffic into its own system.

KLM also saw profits leap in the quarter, giving it net profits of DFl559 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 targeted cost savings of £150 million in the current financial year.

KLM had further good news from alliance partner 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 reported 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.

Source: Flight International