Chris Jasper/LONDON Frits Njio/AMSTERDAM
British Airways has announced third quarter results which suggest it is on the way to a big full year loss, although a rise in yields suggests its new premium passenger strategy is paying off. European rival KLM has posted even poorer figures, but unlike BA discerns no end to its woes.
BA reported a £60 million ($95 million) pre-tax loss for the quarter, with an operating profit of £209 million for the nine months. Analyst Chris Tarry of Commerzbank says this will be wiped out in the last quarter and suggests the carrier will take a full year retained loss of £263 million, although the net figure could be cut to less than £200 million by exceptional gains.
BA's strategy of boosting premium traffic by restructuring its fleet, cabin layout and route network seems to be paying, however, with yields up 3.2%, its first improvement for seven quarters. Premium traffic grew 6.8% and non-premium fell by 2.8%, as planned.
KLM, meanwhile, has reported a DFl39 million ($17 million) net loss for the third quarter, with chief executive Leo van Wijk announcing a cost-cutting strategy, including 3,000 job losses. "We have to cut our cost dramatically," he says. "We will discontinue unprofitable routes and merge frequencies. We will put some aircraft out of service and delay aircraft orders from next autumn." Van Wijk blames fuel price rises for much of the loss, but adds: "Other costs are increasing as well as we look at our break-even load factor."
The Dutch carrier's alliance partner, Alitalia, says a profit figure of L408 billion ($206 million) in 1998 crumbled "close to breakeven" last year, with continuing problems at its new Milan Malpensa hub contributing to the collapse.
Van Wijk is reportedly opposed to the Italian carrier's plans to scale back operations at Malpensa, which KLM regards as the future "Wings" group's second European hub after Amsterdam Schiphol, where scope for growth is limited. He says the alliance with Alitalia may have to be renegotiated and he has criticised US partner Northwest Airlines over its standard of product.
Source: Flight International
