Chris Jasper/LONDON

Europe's major carriers are feeling the financial pinch as over-capacity takes its toll on income. British Airways, KLM and SAS are all reporting sharp declines in operating profits for the last quarter.

BA posted a £200 million ($323 million) pre-tax profit for the three months to 30 June, up from £145 million in 1998, but this was boosted by £177 million from asset sales, including its interest in Galileo International. Turnover was down 2.5% to £2.22 billion, with the carrier blaming "the general economic environment, coupled with relatively weak demand in the premium passenger market and industry-wide price discounting" for a near-halving in its operating profit to £94 million from £173 million in the same period last year. KLM's pre-tax profit dropped to NLG113 million ($55 million) from NLG51 million, with turnover static at NLG3.43 billion, compared with NLG3.44 billion, and operating profit down to NLG166 million from NLG262 million. The Dutch carrier admits that "excess capacity within the industry" and "competitive conditions" are at the heart of its problems, "rather than the global macro economic environment".

SAS, meanwhile, saw second quarter pre-tax profits fall to SKr495 ($61 million) from SKr837, with turnover nudging up from SKr10.32 billion to SKr11.15 billion. Its operating profit was SKr516 - down from SKr849.

Analysts from Commerzbank are projecting a pre-tax loss for BA's full financial year. The UK giant remains pledged to slashing capacity through switching to smaller aircraft and axing "under-performing routes", such as services to Jakarta and Pittsburgh.

The airline adds that capacity growth will now be 0.6% this year, and that available seating will be reduced by "up to 12% over the next three years".

BA is also investing £6 billion as it bids to rescue yields, and has extended the upgrading of its key business product to the Concorde fleet.

Source: Flight International