Kevin O'Toole/LONDON

EUROPE'S AIRLINE industry has turned in its first profit since 1989, but any celebrations over the news were quickly tempered by stark warnings over the congestion and pending European legislation which the carriers believe could damage progress.

The Association of European Airlines (AEA) reports that its 25 members made an operating profit of just over $1 billion during 1995, reversing the losses of the previous five years when the industry had built up a deficit of $7.5 billion.

Behind the improvement lies a 7.8% growth in overall passenger traffic, including domestic services, which allied with restrained capacity growth meant that load factors have risen to a new height of 69.8%.

The AEA highlights the fact that there was a growth of more than 8% in traffic for its members across the North Atlantic, compared with a drop for US competitors. That left US airlines with a slightly decreased 43% market share. Passenger numbers grew at marginally slower rates within Europe, partly because of the effect of competition with the Channel Tunnel.

Growth appears to be continuing into 1996, with international passenger traffic rising by 10.2% in the first quarter and load factors jumping more than three percentage points to 67%. AEA secretary-general Karl-Heinz Neumeister warns that there is a limit to the gains to be made from rising load factors and trimming costs. "Our modest profit has to be viewed in the light of very full aeroplanes and successful cost control, but spare capacity and savable costs are non-renewable resources in the fight for recovery," he says.

Neumeister goes on to lay the ground for a fresh attack on lack of progress over Europe's long-running problems with air-traffic-control inefficiencies and airport congestion. He also makes clear that the national flag carriers are preparing to fight their corner against any moves by the European Commission to change slot-allocation rules in favour of new low-cost start-ups at the expense of traditional grandfather rights. Directives over ground handling and discussion over new pilot flight time limits are also attacked.

Source: Flight International