European Airlines, Reporting Losses, Differ On Demand Outlook

European airlines have, as expected, uniformly reported losses for the first quarter of 2009, but they are divided on whether falling fares are compounding the problem of plummeting passenger numbers.

"The potential for profitability has run into sand due to feeble demand and a collapse in price levels," declared Finnair president and CEO Jukka Hienonen as his carrier announced an operating loss of €47.5 million, compared with a profit of €7.8 million one year ago.

Others disagree. SAS claimed it had "weaker load factors and improved yield" as it announced earnings before nonrecurring items of €88 million. "The company's stable and positive yield trend in the current market climate indicates that we essentially have a strong brand and loyal customers who value our product," it said.

Another airline revealing increased revenue per passenger is EasyJet. Its six-month results, announced today, show a widening pre-tax loss from €54 million to €146 million. However, EasyJet attributed much of the loss to hedging fuel at high prices and said that revenue per seat rose from €43.20 to €49.70.

A further breakdown of the figures showed just how important unbundled passenger charges are becoming to airlines. These ancillary revenues rose exactly 50 percent for EasyJet to €10.30 per seat. Fees for checking bags and sporting goods jumped 82 percent, while priority boarding and other discretionary charges were up 32 percent and card and change fees 42 percent. EasyJet also revealed that bookings through global distribution systems and application protocol interfaces now account for 10 percent of its reservations. The majority of these bookings are by travel management companies for business travelers and the average fare is 20 percent higher than normal for EasyJet.

In other financial results, Lufthansa vowed to press on with acquisitions and alliances strengthening as it declared an operating loss of €44 million, against a profit of €216 million in the first quarter of 2008. Austrian Airlines said its sale to Lufthansa is "going ahead as planned" as it announced a loss of €88 million, compared with a loss of €60 million last time around. The deal is still awaiting approval by the European Commission.