Kevin O'Toole/LONDON
After eight years of wavering finances, punctuated by some spectacular losses, Alitalia's turnaround has begun to take shape with a solid profits performance in 1997. The news comes as part of a series of better results for European airlines, including Swissair and Sabena.
Alitalia, which a year ago posted losses of more than L1,200 billion ($670 million), ended 1997 with a group net profit of L444 billion.
The results were helped by the airline's last-but-one tranche of state aid. This allowed it to cut its debt mountain to a more manageable L706 billion, from more than L2,200 billion a year ago. Asset sales also netted the group around L500 million, together with an accounting change in the method of depreciation.
Alitalia also highlights the progress made in the restructuring agreed 18 months ago. Core airline operations showed an underlying net profit of L138 million, against a loss of around L300 billion in 1996. Operating figures also improved, with a three point rise in passenger load factors to 71.8% and 6% growth in passenger numbers.
Airline costs have continued to fall, helped by the progressive movement of operations into the lower cost Alitalia Team business, with its increased productivity and new work contracts. Boeing MD-11 operations are expected to become the latest to join in May.
Financial restructuring is close to completion, with the final tranche of L500 million in state aid due over the next year and the likelihood of further asset sales, including the headquarters building. Managing director Domineco Cempella sees privatisation within the next two years as the next step.
The Alitalia results followed a better showing from Belgium's Sabena group, which is working towards a deadline of breaking even this year set by controlling partner Swissair. The airline managed a small operating profit of BFr616 million ($16 million), compared with heavy losses a year ago. The group was charged over BFr2.5 billion to complete the cleaning up of its books, with a final provision for pensions and a write-off against the value of African hotels and its Boeing 747s.
In 1996, the Sabena Group had plummeted to a deficit of BFr8.8 billion because of operational losses and restructuring charges.
Swissair has reported a solid improvement in performance over 1997, with passenger traffic climbing by over 17% thanks to the reworking of the network around the Zurich hub a year ago. Preliminary financial results from the parent SAir Group show a doubling in operating profit, helped by a SFr100 million ($68 million) gain from currency movements. Net profit came in at SFr324 million, compared with a loss of SFr497 million in 1996 when the group had taken a charge to cover any "unforeseen" costs of European airline deregulation.
Source: Flight International
