It's time to open those bottles of champagne again, as Airline Business reports another year of airline profits. With the 100 largest carriers achieving a collective net profit of nearly $5.5 billion, 1996 looks like another vintage year.

Hold on. Before you are overcome by frothy bubbles, take a sober look; on close examination, 1996 may not appear so great after all.

This year's Airline Business 100 shows a remarkably patchy performance. Many major carriers have achieved record results, but continuing heavy losses at a small number of airlines have held back the collective total to less than that achieved in 1995 - a record year after five consecutive years of losses. This produces a paltry net margin of 1.9 per cent, nowhere near the sort of profit which a healthy, capital intensive industry ought to be making at the peak of the economic cycle.

Furthermore, operating profits for the 100 most significant carriers declined by 10 per cent to less than $14 billion - a fall which was aided, admittedly, by a fuel-price hike over which airline managers have no control.

The top 100 carriers achieved steady but unspectacular traffic growth, with total tonne km up by 3.7 per cent, revenue passenger km up 5.4 per cent, and passenger load factors up by more than a percentage point to 70.2 per cent. However, revenues rose by only 3.1 per cent. While this is distorted by exchange-rate variations and non-airline activities, it suggests a fall in yields.

The comparison with previous Airline Business 100s shown opposite is distorted because the makeup of the 100 airlines changes slightly each year as carriers move in and out. However, this comparison shows that the efficiency of the airline industry is improving.

Revenue per employee rose by 2.5 per cent as employee numbers remained level, and the fleet grew by less than 3 per cent. Taken together with the load-factor improvement, this provides a clear indication that airlines are making better use of their assets. However, a potentially worrying trend is that freight traffic - which accounts for nearly one third of industry revenue tonne km - rose by only 2.1 per cent last year.

American Airlines' parent, AMR Corp, moved into top place in the airline profits rankings last year, with a $1.8 billion operating profit and a net profit of over $1 billion. Three other carriers - United Airlines, British Airways and Northwest Airlines - also achieved $1 billion-plus operating profits.

Nearly three quarters of the top 100 airlines made a net profit last year, but the 27 which did not lost over $3.5 billion between them - with Alitalia, Swissair, TWA, Sabena, Korean Air and Japan Airlines heading the list. The US majors accounted for more than half of the industry's net profits, with Asia-Pacific just about holding its own and the European carriers witnessing a significant decline, although Alitalia's massive loss distorts Europe's collective result dramatically.

Fourteen of the 150 largest airlines achieved double-digit net margins, although the stellar performances from Aeromexico, Middle East Airlines and Mexicana are distorted by one-off gains. Of the top 50 carriers, only SIA, Vasp and Cathay Pacific made net margins good enough to be proud of.

Five carriers - Garuda, Air China, Britannia Airways, Egyptair and Air Afrique - are large enough to be included in the top 100, but have failed to provide 1996 revenue figures. They have been ranked according to total traffic among the 'other carriers' on page 38.

This year's survey starts with a comparison of the major alliance groups. After that come six pages of data for 180 carriers. These are followed by an alphabetical list of the top 150 airlines; financial and traffic tables with commentary; regional breakdowns; and a page of notes and definitions.

Source: Airline Business