British Airways and Virgin
Atlantic both provided confirmation of a trend for rising average fares last
Friday with their results for the second quarter of 2010. The two United
Kingdom-based airlines reported improved yields, although BA ascribed the
hardening in pricing to business travelers buying more expensive tickets within
the same cabin, while Virgin claimed that passengers are upgrading once again.
Alitalia also reported rising revenues for the first half of the year last
Friday.
BA said yields improved 13.5 percent between April and June, or 12.7 percent
excluding exchange rate variations. The airline said the increase was
"driven by a change in mix, especially within cabin." A spokesman
said this meant corporate travelers are not upgrading, but are instead buying
more flexible tickets within the same cabin.
Virgin, on the other hand, said that a 15 percent increase in demand for its
Upper Class business class cabin led its revival in fortunes over the quarter.
In contrast to BA, Virgin global sales general manager Paul Wait said he is
seeing corporate clients upgrade to less flexible classes in Upper Class. In
addition, he added, clients are traveling in greater numbers. "Yield has
hardened and revenues are up," he said. "Some clients have increased
their business with us by almost 20 percent. Our Premium Economy cabin is also
very full."
There is little sign of the airlines destabilizing their yield improvements by
throwing on extra capacity. BA said it will add only one Boeing 747 to its
fleet this winter.
Despite better yields, the financial performance of both airlines over the
period was impaired by other problems. A combination of the volcanic ash crisis
and industrial action by cabin crew wiped £250 million from the profitability
of BA. As a result, it made a pre-tax loss of £164 million, up from a loss of
£148 million in the same period last year. The airline's operational loss was
£72 million, compared with £94 million last time. Passenger revenue was down
3.4 percent, but BA said it would have been up 11 percent had it not been for
the disruption.
Virgin said the volcanic ash cost it £30 million, yet this did not prevent
revenues from climbing 10 percent to £513 million, with average load factor
rising to 82 percent. Virgin also reported last Friday a pre-tax loss of £132
million for the year ending Feb. 28. Revenues fell 8.6 percent.
Alitalia also reported that revenues for the first half of 2010 grew 13
percent, but the airline still had an operating loss of €129 million, reduced
from €273 million in the same period of the previous year. Alitalia announced
on July 14 that it is to join the transatlantic joint venture operated by
SkyTeam partners Delta and Air France-KLM.