ft.com:
Airlines beset by heavy losses
By Kevin Done in London and John Burton in Singapore
Published: July 30 2009 19:11 | Last updated: July 30 2009 19:11
Leading airlines in Europe and Asia reported heavy losses on Thursday amid the deepening crisis engulfing the aviation sector.
Giovanni Bisignani, director-general of the International Air Transport Association, said carriers were being hit by “shocking” revenue falls on international routes of up to 30 per cent at the beginning of the busy June-August travel period, when airlines traditionally made their money.
He said: “The outlook remains bleak . . . There are no signs of an early economic recovery.”
Air France-KLM, the largest European airline measured by passenger traffic, said it had been hit by an €823m ($1.1bn) downturn in the three months from April to June, as it fell to a pre-tax loss of €612m from a profit of €211m.
All three leading European carriers are deep in loss and have been forced into the capital markets in recent weeks to bolster their shrinking cash resources.
British Airways will on Friday announce an operating loss for the first time in its history for the three months from April to June, traditionally its second strongest quarter of the year.
Germany’s Lufthansa, which is taking over three smaller struggling European carriers, reported a pre-tax loss for the six months to June of €336m, down from a profit of €478m.
In Asia, Singapore Airlines, the world’s most highly valued airline by market capitalisation, warned it could make a full-year loss for the first time since it was founded in 1972, as it reported its first quarterly deficit since the Sars crisis in 2003.
Singapore Airlines reported a net loss of S$307m ($213m) in the April-June period against a profit of S$359m a year ago.
Revenues fell 30 per cent to S$2.87bn. Fuel hedging losses amounted to S$287m.
Long-haul network airlines are being hit by sharply falling revenues in particular from premium business travellers, previously their biggest source of profits, as well as from the plunge in demand for air cargo.
Mr Bisignani said airlines were also confronting the threats of a renewed rise in the oil price and the potential impact of swine flu.
“Cash flow is threatened by weak demand, exaggerated by fare discounting, and after years of cost reduction, the scope for further cuts is limited.”
Iata said that air cargo demand was 16.5 per cent lower in June than a year ago, while international passenger traffic fell 7.2 per cent year-on-year.
Copyright The Financial Times Limited 2009