High season brings more turbulence for airlines

Poor results will further narrow the gap between flag carriers and no-frills operations, writes LAURA SLATTERY

IT MAY be high season for holidaymakers, but for the airline industry the passing of another financial reporting season has been a fortnight to forget.

Ryanair’s announcement that it is to cut its winter Dublin services by 20 per cent to 1,000 flights a week with the loss of 250 jobs at Dublin airport was not the only visible sign of turbulence. Out of the five “majors” to issue second-quarter figures, only EasyJet reported a rise in revenues from passengers, partly the result of expanded capacity. British Airways, Air France-KLM, Lufthansa and Ryanair all reported plunges in passenger revenues.

Headline fares may be falling, to the benefit of holidaymakers whose travel bugs have not yet been cured by recession, but free in-flight catering could finally be killed off during this downturn.

British Airways, which yesterday reported a £106 million (€124 million) net loss in the three months to the end of June, has scrapped the free sandwiches on short-haul flights and replaced them with free pretzels in a bid to scrape back an estimated £22 million a year – a symbolic move that narrows the gap between its traditional flag-carrier service and those of competitors with fewer frills. Its more substantial cost-cutting measures include delaying plane deliveries and renewing its commitment to eliminate as many as 4,000 jobs in a bid to survive.

But BA is still judged to be in a better position by analysts than Air France-KLM: its second-quarter figures were branded “horrific”.

Ryanair chief executive Michael O’Leary may have blamed Ryanair’s decision on the Government’s €10 travel tax and airport charges, but Minister for Enterprise Mary Coughlan’s rebuttal that its decision was due to the general downturn in the aviation industry is backed by miles of statistics.

According to the International Air Transport Association (Iata), airlines will lose a total of $9 billion in 2009 – on top of an $8.5 billion loss last year. British Airways chief executive Willie Walsh yesterday described this forecast as “optimistic”.

Earlier this week, the chairman of the Association of European Airlines (AEA), Ivan Misetic, sounded like he was very much in need of a holiday as he met the European Union transport commissioner, seeking industry access to European Investment Bank funding. “The airlines are used to managing economic disturbances; this is an economic maelstrom,” he said.

An update on how Aer Lingus is faring in this environment will come on August 27th, when the airline publishes its half-year results. A recent dismal forecast from Bloxham Stockbrokers predicts it will record an operating loss of more than €150 million in 2009.