Several European airlines this week followed last week's announcements of large profits from their U.S. counterparts by unveiling similarly spectacular figures for the third quarter. Details released by British Airways, Iberia and Lufthansa, among others, in their results statements implied that customers are paying higher average fares owing to a combination of more long-haul travel, a return to premium cabins and higher load factors that have pushed passengers into higher-fare buckets.
BA on Friday announced an operating profit of £370 million for the three months to 30 September 2010. In the same quarter last year, it made a loss of £17 million. In common with many other European carriers, this is the first quarterly profit BA has posted since the recession started, although most would have released positive figures for second quarter had it not been for the volcanic ash crisis.
BA's financial year starts on 1 April, and in the six months to 30 September passenger revenue was up 7.9 percent while capacity was down 6.2 percent. In consequence, the airline said, "Yields improved by 17.2 percent, 14.4 percent excluding the impact of exchange, driven by price and mix across all cabins."
The airline announced that from spring 2011 it would resume using a second Boeing 747 which it had parked during the recession, although with demand expected to continue improving, the additional capacity is unlikely to hurt yield. BA maintained a cautious outlook, expressing concern in particular over the United Kingdom's air passenger duty, which will increase by up to 55 percent on 1 November 2010. "While positive, the economic environment continues to be subject to uncertainty, to which the increase in APD is unhelpful," according to the airline.
BA also revealed that it now expects to complete in January 2011 the merger with Iberia, subject to a shareholder vote on 29 November. Iberia unveiled on Friday an operating profit of €77 million for the third quarter. Capacity was up 3.4 percent, but demand was up 7.7 percent, thanks to a 15 percent surge in long-haul demand. Iberia attributed a 4.3 percent increase in average earnings per revenue passenger kilometre to growth in long-haul business class passengers.
Meanwhile, the Lufthansa Group on Wednesday announced an operating profit of €783 million, up from €218 million during the third quarter of 2009. It cited sharp improvements in demand, especially on long-haul routes and its cargo business, as well as cost-cutting measures and "realized synergy potentials in the Airline Group." All the group's carriers made a profit during the quarter, including small surpluses for Austrian Airlines and British Midland--the first since Lufthansa acquired them.
While claiming that it continues to be challenged by a highly competitive marketplace, especially on short-haul routes, Lufthansa said it expects to achieve profits in excess of €800 million for the full calendar year. Air France also issued profits guidance this week, saying it expects to achieve a positive figure in the year to March 2011, having previously warned it only hoped to break even because of the ash crisis.
Another airline celebrating a return to profitablity this week was Finnair, which announced a profit of €42 million after spending the previous seven quarters in the red.