Profits among leading European carriers improved slightly in 2014 though the picture remains extremely mixed between operators, the latest Airline Business World Airline Rankings underlines.
Collective net profits for European operators among the 100 biggest airlines stood at just over $2.1 billion, compared with roughly breakeven for the same carriers in 2013 – the difference virtually entirely accounted for by Air France-KLM almost wiping out the $2.4 billion lost in 2013. At an operating level, combined profits rose $300 million to $5.9 billion.
There was some easing in costs for airlines as the fuel price eased, though some of this benefit was lost due to the relatively higher costs for European carriers resulting from the sharp strengthening in the US dollar.
But the picture is mixed. Out of 24 European carriers, a third were in the red at an operating level in 2014, and nearly half of leading European carriers made a net loss.
The picture in Europe includes thriving network carrier IAG – where even long-struggling Iberia made a return to profit – a distinctly mixed picture at Lufthansa and further losses at Air France-KLM.
Fortunes are likewise mixed among Europe's second-tier network operators, which largely remain in restructuring and cost-cutting mode. Several, however, have secured key investment aimed at securing their long-term sustainability. TAP Portugal, after David Neeleman's Azul won the bidding in its recent privatisation, and IAG-bound Aer Lingus both appear to be in the process of joining the likes of Alitalia and Czech Airlines in securing fresh investors.
Many others hope to follow suit. The latest is Slovenia's Adria Airways, privatisation of which was formally launched at the start of July.
Still, the continued restructuring efforts at Air Berlin – which remains loss-making more than three years after Etihad's investment – illustrates that attracting an investor is not in itself a panacea for airline ills.
Low-cost carriers in Europe are largely faring better. EasyJet and the revamped Ryanair are both profitably expanding, the latter seeing big gains after following EasyJet into more business-friendly operations. Vueling has remained profitable during its growth spurt, while Pegasus and Wizz Air both had successful market listings. Shortly after its listing, Wizz joined its low-cost peers in placing a big long-term fleet deal, covering up to 200 Airbus A320neos, during the recent Paris air show.
Norwegian, which has faced additional costs and pain from the stalled approval for its ambitions to operate transatlantic flights through an Irish subsidiary, was the only one of the big European low-cost operators that was not profitable in 2014.
It was a difficult year for Russian carriers, hit by political and economic uncertainty amid the Ukraine crisis, with its leading operators posting reduced profits or net losses in 2014.
HARD LABOUR
As European network carriers continue their restructuring efforts, labour relations for many are coming under further pressure.
Some have come through the pain. Lufthansa unit Austrian Airlines, for example, last autumn reached settlement with employee representatives, following an acrimonious dispute since 2012, when Austrian transferred all flying staff members to its lower-cost regional unit Tyrolean Airways. Its parent Lufthansa says the restructuring should create "significant" savings from next year.
Aer Lingus too hopes to secure planned cost efficiences after resolving its long-running pensions dispute with unions.
Others, though, continue to face pressure with labour, whether it be in securing new labour terms or through industrial action.
Lufthansa continues to face some of the most testing labour relations as it attempts to reach terms for new collective deals. "What we have to do is balance short-term problems for our customer, for our operations, for our image, versus long-term sustainability of our structure," chief executive Carsten Spohr told Airline Business in October 2014 as the carrier battled a run of pilot stoppages. "It is necessary to make these restructurings. I think there is no room for wrong compromises."
Its pilots have just broken off a temporary truce after arbitration failed to broker a deal in the long-running dispute. Meanwhile, a strike threat from its cabin crew has been put on ice as talks on a new deal continue.
Lufthansa likewise has identified a pensions issue and is calling on unions to accept "urgent" changes to its company pension scheme as low interest rates inflate the existing system's deficit.
"More urgently than ever, we need sustainably financeable solutions in place of obsolete [pension] structures. We can only achieve this together with our collective bargaining partners," says finance chief Simone Menne.
Air France-KLM has also faced its share of labour pain. Having been forced to drop plans for a pan-European Transavia operation to put an end to a damaging pilot strike last year, its frustrations are growing in its attempts to secure the labour cost savings envisaged under its Perform 2020 programme.
Not that their low-cost rivals have not suffered. Norwegian was hit by a pilot strike in March, while Ryanair has dropped it new Copenhagen base after a Danish court ruling allowed local unions to call industrial action.
Source: Airline Business
