European network carriers might be gaining some solace from having reached the bottom of the current crisis, but few will be under any illusions about the speed of any recovery for the region's battered airline market.
Collective results for European carriers for the three months to the end of September show the extent of the tough revenue environment airlines. Figures from the period for a selection of 15 leading European carriers show revenue declines at all but a handful of operators. Total revenues for these carriers was more than 12% down on the same stage last year.
In terms of these 15 airlines, profits were also down, at both operating and net level. Collective operating profits for the period fell more than quarter, from a little over $2 billion in the third quarter of 2008 to $1.45 billion this time around. Notably, though, the three budget carriers in this sample all increased their operating profit, as Europe's largest low-cost operators continue to see modest profit gains.
"In Europe, where economic recovery has been slow and capacity cuts limited by slot regulations, there was a further deterioration," says IATA in its latest industry financial forecast. IATA notes that, while profits were reported, this reflects the benefits of seasonally strong traffic in Europe. "The fourth quarter will be much more challenging," it says.
IATA estimates that European and Asian carriers will lose roughly $3.5 billion in 2009. But the similarities for the two regions end there. While some key Asian economies are already recovering and poised for encouraging growth in 2010, the pace of economic recovery in Europe is expected to be modest at best. Consequently while IATA expects Asia-Pacific carriers to cut losses to around $700 million in 2010, it believes European carriers are likely to again face the largest losses of any region. It predicts European carriers will lose another $2.5 billion in 2010.
European network carriers are continuing with their efforts to restructure, embarking on major cost-savings initiatives, re-engineering their businesses and looking to tackle labour costs. Aware of the scale of the crisis facing its member carriers, the Association of European Airlines has been pressing the case for an industry-wide summit to deal with the problems facing the sector. Thus far this call has yet to garner any result.
As the year draws to a close, one notable side note to the economic crisis in Europe is the unprecedented movement in airline boardrooms in Europe. When easyJet chief executive Andy Harrison recently announced he would step down in the summer of 2010, it brought to eight the number of airlines out of the top 20 carriers by revenue in Europe to change chief executives this year. The reasons have been varied, ranging from chief executives being fired, promoted or leaving through plain frustration. Whatever the causes, it demonstrates the huge changes being seen across the European airline landscape and underlines that there has seldom been a more challenging time to lead an airline.
More here on how low-cost carriers in Europe are weathering the current crisis
Source: Airline Business
