Europe's major international carriers swung back into the red during 1996, having had only one profitable year out of the last seven, say preliminary estimates from the Association of European Airlines (AEA).

In its annual review, the AEA says that the early evidence points to a pre-tax loss of $90 million on its members' international services. That compares with a collective profit of $870 million in 1995 - Europe's first since 1989.

The disappointing results follow a system-wide decline in yields of 3.2%, which wiped out a modest 0.5% fall in unit costs. The AEA highlights rising fuel prices as the main culprit for the loss, estimating that 1996's price increase from 193 cents/litre to 242 cents/litre added $700 million to airline costs.

Despite the overall loss, operating results were encouraging, with passenger traffic rising by 7.9% and staying comfortably ahead of capacity growth, giving a slight rise in load factors to 70.4%. Passenger yields, however, dipped by 2.3%in local currency terms, with the extent and depth of discounting continuing to grow.

North Atlantic passenger services performed well, with a slight rise in yields and a record 74.7% load factors, but European operations suffered declines in both.

The AEA points out that European load factors, at 61.6%,are still a percentage point behind where they were standing in the late 1980s, adding that every point is worth around $320 million in average revenues.

Cargo traffic also grew by 4.5%, led by routes to Asia, which have overtaken a sluggish North Atlantic market for the first time. Despite this traffic growth, European cargo revenues were down by $585 million, says the AEA, because of a "huge" 8.8%drop in yields.

In real terms, the AEA says that freight fares have fallen by around 40%over the past ten years, compared with a 30%decline in passenger fares.

Source: Flight International