Airline Weekly - May 31, 2011
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Airline Weekly - May 31, 2011

Trouble in Europe: Last quarter was one most European carriers would rather forget. So what’s next?

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Cover Story

Trouble in Europe: Last quarter was one most European carriers would rather forget. So what’s next?

This time will be different, Europe’s airlines say. And maybe they’re right: the latest ash clouds spewing from Iceland’s volcanoes really won’t paralyze aviation like they did last spring. If nothing else, officials are better prepared now.

Probably true. But it’s hard to see smoke and not think fire. Even if the ash clouds prove harmless this time, they’ll be another symbol of the exasperating set of challenges thrown at Europe’s airlines in the past year—not just by mother nature but by governments, labor unions and geopolitics too.

As bad as things were for European carriers last spring—when the ash cloud grounded more than 100,000 flights and disrupted 10m passengers—the affected April-to-June quarter didn’t turn out all that poorly. Several major carriers including Lufthansa, Iberia, Ryanair, Aer Lingus and Vueling all managed Q2 profits regardless. British Airways might have come close too had its cabin crew not gone on strike. As it happens, the busy Easter holiday period fell in Q1 last year, before the volcano erupted, and service was back to normal by the peak month of June. Even the mass cancellations, while costing Europe’s airlines more than €1b (according to the Association of European Airlines), had a financial silver lining: carriers saved a lot of expensive fuel while recapturing much of the lost revenue anyway as disrupted passengers rebooked on other flights. Airlines in southern Europe, moreover, were considerably less affected.

Indeed, the second quarter of 2010 was a golden era compared to what most European carriers experienced in the recently completed first quarter of 2011. Every major European airline that discloses results (and probably the few that don’t disclose too) lost money at the operating level in Q1—the only exceptions were Swiss and Wideroe, small parts of much larger airline groupings. While all European airlines lost money in... (321 of 1324 words)

Also Inside this Issue:

First quarter earnings season is now all but finished, with the last few prominent airlines like Ryanair and AirAsia reporting last week. All in all, the period featured mixed results, with some airlines and regions performing well and others (including most European shorthaul carriers) performing poorly.

Everyone seems to be starting a new airline, with Thai Airways, Singapore Airlines and All Nippon being three examples in Asia. Singapore’s venture is perhaps most intriguing, designed evidently to combat rising competition from Jetstar and AirAsia X.

Japan Airlines might eventually launch a new LCC. But for now, it’s busy preparing new longhaul routes using incoming B787s. Tokyo-Boston will be its first B787 route, announced even before knowing where launch customer All Nippon will fly its first new plane.

Elsewhere in the Asia-Pacific region, Korean Air took delivery of its first A380 and Qantas pilots moved closer to striking. In the U.S., meanwhile, US Airways and Delta offered a new plan to swap New York and Washington slots.

As for earnings, Ryanair lost money in the off-peak first quarter while AirAsia made a lot of money in what’s a peak period in the ASEAN region. Malaysia Airlines turned in poor results, and Kingfisher continued its money-losing ways.

The arrival of June means the second quarter is now in its final weeks. It also means the start of the busiest three months of the year for many airlines, some of which depend entirely on summertime success for any hope of full-year profits.

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