A welcome turnaround in the fortunes of Irish carrier Aer Lingus saw a return to profit in its first half, but elsewhere in Europe there was bleaker news.
Austrian Airlines reported a first- half pre-tax loss of EUR28.6 million (USD$32.4 million) compared with a profit of EUR4.3 million last year.
Ireland’s flagship airline said pre-tax profits of EUR17 million (USD$19.3 million) were the result of its relentless campaign to drive out costs and lower its fares and it predicted full year profits of EUR75 million
The airline announced an operating profit of EUR14.3 million for the first half of 2003 against an operating loss of EUR12.6 million for the same period last year and an operating loss of EUR38.1 million for the first half of 2001.
Turnover was down by 8.6 per cent at EUR414.1 million,compared to last year’s EUR453 million, but the airline successfully reduced costs by 14.2 per cent
The low fares strategy sustained by a much lower cost base led to a significantly higher passenger load factor at 80 per cent for the first half of 2003 compared with 73 per cent for the same period last year and 69 per cent in the first six months of 2001.
Chief Executive Willie Walsh warned that Aer Lingus would not become complacent: “We will continue until the process of transformation (to a low fare airline) is complete. There are many challenges ahead. We must further improve profitability, continue to reduce costs, add new routes and continue to lower our fares,” he said.
Austrian Airlines blamed its losses on the war in Iraq, the outbreak of SARS and continuing weakness in then global economy.
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Adequate results there, nice to see the performance of the airline continuing to grow with many new routes becoming quite fruitful and around 6/8 new ones to be announced. Just shows a good example of how an airline can adapt to market conditions with the rationalisation of the fleet, increased profit margins and major airports becoming profits rather than cost centres. Shows how Aer Lingus can just get on with it without a moan unlike its counterpart.
By: andrew_airbus - 17th August 2003 at 18:16
Come on Aer Lingus. They deserve it. JetMagic, Aer Arann and FreshAer are all seeing profits!!! KEEP IT UP BOYS!!!!
By: Saab 2000 - 9th August 2003 at 08:43
It shows what good business people the Irish are! Three airlines in profit and others such as JetMagic seemingly are doing very well. Pitty the whole of Europe was not like that.
By: MSR777 - 8th August 2003 at 23:26
Aer Lingus is a shining example of an established full service carrier pulling a profit rabbit out of the hat despite the uneven playing field which so favours its closest “competitor” well done folks!
By: Saab 2000 - 8th August 2003 at 20:56
I quite agree there, free meals and beverages are just another loss making product for short haul airlines, many people eat sufficiently in cafés before they board or they will be willing to pay for an in-flight style deli. However, where competitors lead the way is naturally where other airlines follow. Cost cutting is paramount in the industry with the strength of low cost carriers so airlines such as Aer Lingus and KLM have followed their competitors’ example. But what I find highly annoying is how cuts in standard are not compensated in price and how a no-frills style is easily adapted to in everything but price. People are willing to except this and do not take any noticed that the standard of service has dropped but the prices haven’t.
By: MapleLeaf_330 - 8th August 2003 at 20:16
It may interest you to know that Air Canada has moved to the same model, almost. All flights under three hours (or 3.5?) no longer serve complimenatry food. Rather, one can buy a “restaurant style” meal for I believe between $7-10 Canadian. the meals are supplied by serveral Canadian restaurant chains that come under the CARA group. Beverages are still complimentary.
I think that this is the wave of the future for short haul flights. Why should airlines dole out money for something people can do without if they want to? THey have to fly, and if most carriers are doing this, then the one that doesn’t may be wasting their money.
By: Ren Frew - 8th August 2003 at 19:56
It would be a shame if they turned into Ryanair.
By: Saab 2000 - 8th August 2003 at 19:07
Yeah, the times I have travelled Aer Lingus, only twice but still fond memories, I have always found there is a genuine willingness to serve from crew with an attitude that compliments their country very nicely. However, were I believe Aer Lingus has gone too far is with their service on European flights towards a Ryanair type product. Aer Lingus were in dire straits I know that and to come back with a profit is nothing but good news but the positive PR will ultimately disappear as they drown into the epitomes of a Ryanair style product. Drinks on short haul now only consist of tea, coffee or an OJ with no options for a different type of beverage. A meal even for premier class leaves a lot to be desired with only a sandwich being offered with a drink. Now I know they have to keep costs low but when you turn your product into this and your prices are not exactly of a low cost type, then you will lose that customer base that have before been pleased with your airline. In the end it will yet another “wanna be low cost carrier” with a poor service, this is not the style in my opinion that a national carrier should be aiming for and the uniqueness that Aer Lingus once offered should not be deserted as this is what distinguishes them from that Ryanair airline.
By: Ren Frew - 7th August 2003 at 21:39
Whilst I agree with Saab’s views, I also think in the case of Aer Lingus that they have worked very hard on customer service and satisfaction. This is important and what the travelling public remembers.
I could list a lot more airlines I’ve flown on where the staff seem phoney and ungenuine in their service approach, than those who appear to enjoy what they do and radiate that quality around the cabin. In the Aer Lingus case I’m happy to recommend them to others as I’m sure plenty of people who’ve enjoyed their laid back style do as well.
It’s true that positive PR is hard to account for in revenue terms, but it must make a difference to the balance sheet. I’d cite Virgin Atlantic as being another case in point.
By: Saab 2000 - 7th August 2003 at 21:23
I suppose it is a case of market adaptation more than saturation. Many of these airlines that are now in financial difficulties caused them by themselves with the “get big” syndrome. They have moved into markets that do not necessarily need their presence with passenger numbers not fit to sustain these routes. In a way they have moved out of profitable niches into a bigger world of competition where they are more vulnerable. A prime example being Swiss who have grown too big and have run unprofitable routes and aircraft for far too long, whereas its counterpart SNBA, learned that it should just grow small in its niche, Western Africa.
So really in my opinion, airlines that are posting a profit have realised there potential in certain areas and have adapted to it, it is no use being something to everybody or having a prestigious network anymore, which has been realised. An example is Aer Lingus who have kept costs down and efficiency up as well and so are now posting a profit whereas an airline like Swiss or Austrian don’t seem to realise this or do not take drastic enough measures, hence unprofitbaility.
There is more to it I know, however, it again stresses the need for consolidation in Europe.
By: MapleLeaf_330 - 7th August 2003 at 18:26
Do you think that certain European airlines inability to post a profit is an indication of market saturation? Some of your airlines appear to be doing well, while others aren’t fairing as positively.
I know AC in Canada is in severe trouble, but that is a variety of factors, including the post 9/11, SARS, global economy.
For instance, when I hear that Austrian is losing money, is it because it’s too close to other major carriers?
Also, it seems that airlines in the One World are, on average, fairing better than STAR.
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August 7, 2003 at 5:29 pm