As expected, Lufthansa, British Airways and KLM all reported profit declines for their latest financial year. Income from the disposal of stakes in systems companies Amadeus, Galileo and Equant could not disguise the fact that last 12 months have been a torrid time for the European majors.

However, all three see signs of recovery in the air transport market, although they expect conditions to remain "competitive". BA, now with a new chief executive at the helm, showed a further 3.3% growth in passenger yields for the March quarter, carrying over the trend from the end of last year. KLM president Leo van Wijk, also reporting for the year to March 2000, noted improved yields in the final six months. Lufthansa chairman Jurgen Weber says yields, which fell steeply for its 1999 year, declined more slowly in the second half, and that the trend appears to be continuing.

All three carriers saw substantial dips in operating profits, although in Lufthansa's result was DM100 million ($45.6 million) above analyst expectations. KLM's operating income halved, and without the Equant windfall, the group was not much above break even. BA would have been around £250 million in the red without special gains.

Van Wijk was cautiously optimistic for the current year, saying "even though the competitive environment is improving as the industry is showing more restraint in capacity growth, we expect industry conditions to remain challenging for some time."

Lufthansa's chief financial officer, Dr Karl Ludwig Kley, says the outlook is much better than a year ago, thanks partly to "capacity trends more in line with demand". Lufthansa is targeting a 10% rise in operating profit this year.

The weakness of the euro against the dollar raised costs for Lufthansa and KLM, but both airlines gained overall from the positive impact on yields.

KLM reports that union agreement on its latest restructuring programme is "90% complete".

European airline group financial results full financial year – 1999/2000 ($ million)
 

Sales revenue

Op result

Operating margins

Net profits

Special Items*

Airline group

$ million

change

$ million

1999

1998

1999

1998

Lufthansa group

13.626

9.0%

762

5.6%

9.1%

671

779

229

British Airways

10.254

0.5%

96

0.9%

5.0%

-12

236

286

KLM

6,706

4.1%

101

1.5%

3.2%

359

220

355

Note: *Net results include extraordinary gains from sales of stakes in Equant Amadeus, etc listed under special items. BA and KLM financial year to March 2000. Lufthansa Group to December. All figures are in US dollars exchanged at average rate for period. All changes given in local currency terms.

Source: Airline Business

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