FLUG REVUE March 2004: Airlines climb back

AIRLINES: GROWTH IN SIGHT ONCE MORE

By Volker K. Thomalla

It would appear that the worst of the global crisis in aviation is finally behind us. Having deserted the airlines in droves following the terrorist attacks of 11 Sept 2001 and then the Iraq War and the SARS crisis in Asia and Canada, passengers are slowly returning. The airlines are gradually making their way back on course, even if their operating results have not yet reached the heights they would like.

For example, although the big US airlines, Delta Air Lines, American Airlines and United Airlines, all reported growth in passenger numbers in the fourth quarter of 2003, their quarterly results were still in the red. Delta Air Lines announced a $327 million loss for the quarter (compared with $773 million in the previous year) and United Airlines lost $135 million in the last three months of 2003 (compared with $994 million in the same quarter of the previous year), while American Airlines reported a loss of “only” $111 million, a $418 million improvement on its reported loss for the fourth quarter of 2002.

But the trend is clear: the airlines are approaching break even again, and if they continue their cost-cutting programmes, they could by and large be back in profit for 2004 as a whole.

The 31 airlines which make up the Association of European Airlines (AEA) together carried about one percent more passengers in 2003 than in 2002. This means that passenger numbers are more or less back to the level of 1999. When one bears in mind the SARS crisis and the collapse in demand for air travel in Asia that this caused, it is a truly remarkable increase, for, according to the AEA, some airlines actually carried up to 20 percent fewer passengers on their Asian routes during the summer months. Lufthansa's figures show that it is right on course, as in 2003 it carried one percent more passengers than in 2002.

AEA General Secretary Ulrich Schulte-Strathaus is optimistic about the prospects for 2004: AEA is expecting traffic to grow by 7.5 percent compared with 2003, with traffic in the Far East experiencing the highest growth rates, at 14 percent. In Europe too, AEA is predicting the volume of traffic to rise by an impressive 6 percent compared with 2003.

However, the growth forecasts are not yet on stable ground. The recovery we are experiencing today is not sufficiently robust to acquire a self-perpetuating momentum. As air transport is globally interconnected, even events on other continents have repercussions all around the world. News such as the outbreak of bird flu in Asia and the associated fatalities are poison to the expected upswing, as they hardly encourage either tourists or business travellers to fly to Asia.

Many airlines cannot afford another disaster like the collapse caused by the SARS virus since, with a few exceptions, they have not yet fully recovered from the string of crises since September 2001. Another major crisis could be the last straw for some carriers.

Yet profitable airlines are the precondition to a healthy aerospace industry, as they alone have the financial muscle needed to invest in new fleets.

From page 4 of FLUG REVUE 3/2004

Last updated 12 February 2004

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