Rumours abound about the future of Austrian Airlines' management as the carrier's losses continue to mount, dragged down by a flawed Vienna hub and an ineffective alliance strategy.
Austrian firmly refutes suggestions in the local press that co-chairmen Herbert Bammer and Mario Rehulka will be replaced in the near future. The carrier remains confident of an ATS160 million (US$15.3 million) full-year profit for 1996, following the implementation of cost-cutting measures, which include cutting entry salaries and 200 of the 4,060 positions.
Doubts over the future of the carrier's senior managers surfaced after the airline reported a first half pre-tax loss of ATS313 million (US$29.9 million) against an ATS141 million loss in the 1995 first half.
But despite Austrian's optimistic forecasts for the full year, analysts in Vienna believe the carrier's new traffic system will hurt the carrier further. Roland Neuwirth, an analyst at Deutsche Bank, describes the new hub concept as 'a flop', which caused load factors to fall. In October 1995, Austrian increased flight frequencies by 20 per cent and doubled the number of waves at its Vienna hub to four. Neuwirth predicts the system will result in a full-year loss of ATS95 million in 1996, after a profit of some ATS305 million in 1995, and says the airline will have to revert to its old traffic concept.
Realising that it overreached itself, Austrian is already cutting capacity by some 6 per cent overall. It cut weekly flights to Düsseldorf from 19 to 12 in August and is stopping services to Izmir, Madrid and Hamburg in mid-October. But the airline remains confident that the new wave system will work properly from the start of the winter timetable at the end of October.
But to add to Austrian's woes, the carrier faces another headache because of its inadequate alliance strategy, argues Frank Wade of consultants SH&E in Amsterdam. Wade predicts that Austrian will be relegated to serving origin and destination traffic from Vienna if it fails to build an alliance that allows it access to a major's global network.
Wade sees Austrian's current codeshare agreement with Swissair, Sabena and Delta Air Lines as 'incomplete' in terms of revenue management, scheduling and pricing capacity. Yet Austrian is continuing to develop the alliance and will start codesharing to 10 new US destinations over Atlanta with Delta at the end of October.
Austrian is also talking to Singapore Airlines about a codeshare flight between Vienna and Singapore starting in November 1996. The codesharing is 'the first step towards further cooperation', predicts Austrian's manager of commercial planning, Frans Gruber. Wade welcomes the talks with SIA and says the alliance would improve Austrian's reputation and allow it to connect onto the carrier's Asian network.
Arjen Amsen, consultant at Schiphol Management Services in Vienna, says Austrian should have formed an alliance with a 'more market-orientated' European airline before Austria joined the European Union, when it could have made more of its eastern European route network. Now Lufthansa is a strong competitor in the region.
However, a potential partner closer to home is emerging in the shape of Lauda Air. The two are discussing widening their codesharing, which started in June from Vienna to Rome, Milan and Nice.
Lois Jones
Source: Airline Business
