While 1997 certainly broke all industry records for profitability, there were already dark clouds on the horizon as the effects of the Asian currency crisis began to make themselves felt. There will be worse to come this year as economies in the region continue to slow.
So while the overall picture is one of a leaner, more efficient world industry, which is reaping the benefits of growth, signs of trouble in Asia muddied the waters considerably. Carriers in the worst-hit economies of South Korea and Malaysia in particular plunged down the rankings as currencies tumbled against the USdollar.
The top 100 largest airlines nevertheless achieved a collective net profit of US$9.5 billion, a massive 74 per cent increase over a year ago, while operating profits were also up by a third at $18.6 billion. That was achieved despite the fact that sales crept up by only 2.2 per cent to $287.5 billion.
These figures are themselves a strong indicator that most of the profit gains have come from efficiency and productivity improvements rather than increases in passengers and yields. Average revenue per employee was up 3.9 per cent, while both the fleet and workforce numbers were down among the top 100 airline companies.
Yet, despite the boom, the industry's overall financial performance remains modest. Net margin came in at only 3.3 per cent. There are also signs that growth is tailing off with passenger numbers rising by a mere 2.5 per cent overall. Total tonne km increased by 5.3 per cent, but largely due to a strong 11.4 per cent rise in freight. Load factors remained steady at 70.9 per cent, up by less than a point over last year.
The worst of the Asian crisis had yet to show up in the 1997 returns from the region's carriers, but some early indications of the potential scale of the problem came from the heavy losses logged by Korean Air and Asiana. Malaysia Airlines and the big Japanese carriers also plunged into the red as they attempted to put their houses in order.
Of the 25 Asia-Pacific carriers in the ranking, 11 made losses totalling $1.7 billion. That dragged the region's overall share of the profits down to a paltry $42 million. At less than half a percent of the net profit in the ranking, that was the worse regional result in the survey. The region accounts for 21 per cent of the total revenue.
North America increased its share of revenue to 41 per cent, but thanks to the US boom reported 64 per cent of the profits. Europe took 31 per cent of the revenue and 29 per cent of the profits, while the Middle East and Africa and Latin America-Caribbean together accounted for 6.4 per cent of revenue.
While American Airlines retained the top slots for the highest sales and operating results in 1997, US Airways slipped into top place for the highest net profits thanks to a hefty tax gain. American, and United Airlines were close behind with net profits just below the $1 billion market. Delta Air Lines, Northwest and Federal Express joined the club of US carriers with operating profits above $1 billion.
More than two-thirds of carriers in the survey made a net profit, including some notable turnarounds since the previous year. Profits finally materialised for Europe's state-owned flag-carriers, such as Alitalia, Air France and TAP Air Portugal, as well as for a helping of others from around the world including Canadian Airlines and Aerolineas Argentinas. Of those carriers Alitalia logged the most remarkable swing from a $780 million loss to a $248 million profit.
This year's survey starts with data for the top 148 carriers plus 27 others and is followed by an index and a series of shorter rankings by various financial and traffic criteria, including regional breakdowns.
Airline Business 100 highlights
Net profit: US$9.5 billion, up from $5.4 billion in 1996. Operating profit: $18.6 billion,up from $14.0 billion in 1995. Sales growth: 2.2 per cent.The winners
Highest net profit: US Airways, $1.03 billion. Best net margin: Air Lanka, 23 per cent. Best improvement in net result: Alitalia, up $1.0 billion. Best improvement in net margin: Air Lanka, 26.1 per cent. Highest operating profit: American Airlines, $1.9 billion. Best improvement in operating profit: American Airlines, $824 million. Fastest sales growth: Virgin Atlantic, 80.5 per cent.The losers
Highest net loss: Japan Airlines, $767 million. Worst net margin: AirTran Airlines, - 43.8 per cent. Worst profits slide: Japan Airlines, down $685 million. Largest drop in net margin: Southern Air Transport, - 32.1 points.The biggest
By revenue: American Airlines, $18.6 billion. By overall traffic: United Airlines, 21.8 billion tonne km. By passengers: Delta Air Lines, 101.2 million. By passenger km: United Airlines, 195.4 billion. By freight traffic: Federal Express,9.1 billion tonne km.Source: Airline Business
