Coping with a double-digit revenue fall is incredibly tough regardless of the line of business you are in, especially if it comes rapidly. In the second quarter only a handful of carriers from across Asia and Europe managed to escape such revenue dives and most were seeing the situation getting even worse after an already bad first quarter.
The inevitable outcome of such alarming revenue declines saw plenty of red ink pouring across balance sheets in the quarter. In Europe, Air France-KLM spilt more than most with losses totalling $599 million, an operating margin of -8.4%.
Air France-KLM is typical among the network carriers in not only continuing to suffer from plunging demand, but from the flight of business travellers. In its second quarter presentation it highlights how unit revenues on its long-haul services crashed by 27.1%. Unit revenues on its economy classes fell by 9.9% in comparison. It was no surprise to see the carrier rolling out a voluntary staff redundancy plan shortly after these results were unveiled.
The culprits for these woes are easy to identify. Singapore Airlines summarised the reason for its quarterly loss - the first since the SARS crisis in 2003 - as a combination of the global economic downturn, the outbreak of the H1N1 virus and fuel hedging losses. The airline's revenues fell by a startling 30% in the period, as did those of Japan Airlines, Malaysia Airlines and Thai Airways. JAL's financial troubles are acute, leading it to ponder a strategic investor to help inject cash, as well as other emergency cost-cutting measures (see also p14).
In Australia, Virgin Blue saw its revenues soar by 10% as its V Australia long-haul carrier launched, but start-up costs and the tough economy saw it fall into its first annual loss since its was listed in 2003.
Source: Airline Business