After a turbulent 2003, carriers in Asia and Europe are seeing some signs of better times, but yields remain a key concern.
European and Asian carriers had a tough 2003, with the first half more or less wiped out by a combination of the Iraq war and SARS.
The second half of the year saw some recovery, especially in the Asia-Pacific region where the bounce back from the SARS crisis has been remarkably swift. Barring a few exceptions, the major carriers in the region say they now appear to be back to financial strength.
Hong Kong's Cathay Pacific Airways had an impressive turnaround. After a HK$1.24 billion ($159 million) net loss in the first half of the year, it recovered strongly in the second half to report a full-year profit of HK$1.3 billion.
A financial turnaround was also seen in Taiwan, with both China Airlines (CAL) and EVA Air reporting full-year profits. CAL's earnings were sharply lower than 2002 but boosted by improved cargo activity.
In South-East Asia, Singapore Airlines continued its recovery in the final quarter of 2003, with a net gain more than double that of the same quarter for the previous year. A net profit of around S$600 million ($350 million) for the year to March is now expected, despite unprecedented net losses in the first half. Malaysia Airlines also recorded healthy profits for the December quarter, largely on the back of a stronger performance from international passenger operations.
In Japan, All Nippon Airways (ANA) and Japan Airlines (JAL) also reported better-than-expected results for the December quarter.
JAL reported a surprise net gain for the three-month period, although it still expects a full-year loss. It says international passenger traffic recovered steadily after SARS, while domestic operations performed better, with an improvement in yield. ANA also reported a net profit for the quarter.
In South Korea, both Asian Airlines and Korean Air reported net losses for 2003, but expect a strong recovery this year.
In Australasia, both Air New Zealand (ANZ) and Qantas Airways reported stronger earnings for their fiscal first-half periods to December. ANZ was barely affected by SARS but says it was hurt slightly by a stronger New Zealand dollar. A fact of life for all carriers is a gradually weakening dollar through the second half.
Qantas, meanwhile, says all its businesses returned to profitability in the six-month period. Its chairman, Margaret Jackson says that their results were "excellent given the circumstances existing in the aviation industry".
In Europe, there were some welcome, if tentative signs of recovery in the crucial premium long-haul sector, but yields in the short-haul non-premium sector are under pressure.
Even Ryanair is feeling the pinch. It warns that yields for the March quarter will be 25-30% lower than last year, leading to a 10% fall in net profits.
In this environment, the last thing airlines need is heightened security worries, but British Airways reports that this issue is affecting forward bookings.
The good news for BA is that its Future Size and Shape cost-cutting programme is ahead of schedule (see page 20) helping it rise up the profitability league.
Lufthansa has not yet announced its full-year results, but the provisional figures are sharply down.
Elsewhere, Finnair was hit hard by the crisis in Asia, its second biggest market. KLM managed to return to the black for the December quarter on the back of its own cost-cutting programme. Iberia is less exposed to Asian markets, but is not immune to the low-cost threat and full-year profits were down.
Swiss saw some improvement in the December quarter, although this compares with a very weak 2002. Analysts and investors are waiting to see whether its cost-cutting programme will turn things around in the March quarter.
With a disastrous 2003 now consigned to history, Asian carriers seem to be back to their previous robust selves. There are signs of hope in Europe too, but with the security threats lurking and short-haul yields still under pressure, carriers have much to prove to shareholders through the summer season.
| European airline group financial results Jan-Dec – Full year 2003 | ||||||||
| Airline group | Group revenue | Operating result | Operating margin | Net result | ||||
| $ million | change | $ million | 2002 | 2003 | 2002 | 2003 | 2002 | |
| Aer Lingus | 1,011 | 11.00% | 94.4 | 60.6 | 9.30% | 6.70% | 78.7 | 33.5 |
| Austrian Airlines | 2,552 | 12.00% | 72.1 | 39.3 | 2.80% | 1.70% | 29.2 | 40.7 |
| Finnair | 1,595 | -2.30% | -21.5 | 57 | -1.30% | 3.50% | -18.6 | 35 |
| Iberia | 5,256 | 17.70% | 182.8 | 236.7 | 3.50% | 5.30% | 166 | 151.8 |
| Lufthansa | 42.9 | 1,512.50 | 0.00% | 9.40% | 681.2 | |||
| SAS Group | 7,208 | 6.70% | -110 | 85.1 | -1.50% | 1.30% | -176.6 | -13.7 |
| Swiss | 3,086 | 11.40% | -371.7 | -588.7 | -12.00% | -21.20% | -513.8 | -634.7 |
| TOTAL | 20,707 | -40.70% | -110.9 | 1,402.50 | -0.50% | 4.00% | -435.1 | 293.8 |
| Note: Preliminary Results for Lufthansa, Austrian Airlines and Swiss. Austrian Airlines results are pre-tax. | ||||||||
| European airline group financial results fourth quarter Oct-Dec 2003 | ||||||||
| Airline group | Group revenue | Operating result | Operating margin | Net result | ||||
| $ million | change | $ million | 2002 | 2003 | 2002 | 2003 | 2002 | |
| Air France | 3,767 | 19.10% | 73.4 | 34.3 | 1.90% | 1.10% | 33.7 | 21.2 |
| British Airways | 3,270 | 12.10% | 238.6 | 83.2 | 7.30% | 2.90% | 143.5 | 20.4 |
| Finnair | 497 | 9.60% | -9.1 | 12.7 | -1.80% | 2.80% | -8.3 | 6.4 |
| Iberia | 1,413 | 22.70% | 30.7 | 16.5 | 2.20% | 1.40% | 41.9 | -15.5 |
| KLM | 1,761 | 10.80% | 34.9 | -63.5 | 2.00% | -4.00% | 9.6 | -66.6 |
| Ryanair | 307 | 63.60% | 64.2 | 49.1 | 20.90% | 26.20% | 49.3 | 43.5 |
| SAS Group | 1,839 | -0.80% | -5.1 | -38.3 | -0.30% | -2.10% | -77.3 | -31.5 |
| Swiss | 763 | -3.10% | -69 | -248.6 | -9.00% | -31.60% | -60.5 | -274 |
| TOTAL | 13,617 | 12.50% | 358.5 | -154.5 | 2.60% | -1.30% | 131.9 | -296.1 |
| Note: Results are for airline groups including non-aviation businesses. All figures are in US dollars exchanged at average rate for period. Preliminary Results for Swiss. | ||||||||
| Asia Pacific airline group financial results Apr-Mar – Full year 2002-3 | ||||||||
| Airline group | Revenues | Operating result | Operating margin | Net result | ||||
| $ million | change | $ million | 2002 | 2003 | 2002 | 2003 | 2002 | |
| Japan Airlines | 17,215 | -9.20% | 832 | -83 | 4.80% | -0.40% | 960 | -304 |
| All Nippon Airways | 10,014 | 0.80% | -21 | 190 | -0.20% | 1.90% | -233 | -78 |
| Singapore Airlines | 5,964 | 11.30% | 407 | 558 | 6.80% | 10.40% | 601 | 358 |
| Malaysia Airlines | 2,282 | 3.60% | 38 | -118 | 1.60% | -5.40% | 89 | -220 |
| TOTAL | 35,475 | -2.70% | 1,256 | 547 | 3.50% | 1.50% | 1,417 | -244 |
| Asia-Pacific airline group financial results Jan-Dec – Full year 2003 | ||||||||
| Airline group | Revenues | Operating result | Operating margin | Net result | ||||
| $ million | change | $ million | 2002 | 2003 | 2002 | 2003 | 2002 | |
| Asiana Airlines | 2,105 | 1.30% | 28 | 140 | 1.30% | 6.70% | -26 | 157 |
| Cathay Pacific | 3,799 | -10.50% | 286 | 609 | 7.50% | 14.40% | 167 | 511 |
| China Airlines | 2,209 | 4.20% | 82 | 153 | 3.70% | 7.20% | 48 | 90 |
| EVA Air | 1,904 | 1.70% | - | 147 | - | 7.80% | 38 | 76 |
| Korean Air | 5,180 | 2.60% | 258 | 108 | 5.00% | 2.10% | -202 | 366 |
| TOTAL | 15,196 | -1.10% | 396 | 1,049 | 2.60% | 7.50% | 25 | 1,201 |
| Australasian airline group financial results Jul-Dec first half 2003-4 | ||||||||
| Airline group | Revenues | Operating result | Operating margin | Net result | ||||
|
| $ million | change | $ million | 2002 | 2003 | 2002 | 2003 | 2002 |
| Qantas Airways | 3,398 | 3.30% | 310.7 | 300.6 | 9.10% | 8.80% | 210 | 207 |
| Air New Zealand | 906 | -0.80% | 77.5 | 72.1 | 8.50% | 7.50% | 55 | 49 |
| Note: Results are for airline groups including non-aviation businesses. All figures are in US dollars exchanged at average rate for period. All changes given in US$ currency terms and previous year net profits at constant current rates. | ||||||||
Source: Airline Business
