No silver lining to clouds in airline business | Business| Economy and finance news from a German perspective | DW | 30.07.2012
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No silver lining to clouds in airline business

While Ryanair saw profits slump by a third, Air France-KLM posted a huge loss in the second quarter of 2012. High fuel costs, low consumer spending and the euro crisis are compounding the woes of Europe's carriers.

Ryanair posted a net profit of 99 million euros ($121 million) in the months April through June, which was 29 percent less than in the same quarter a year ago.

Europe's biggest budget airline said Monday that passenger numbers had climbed six percent to 22.5 million, which had boosted second quarter revenues 11 percent to 1.28 billion euros.

However, the result was weighed on heavily by rising fuel and oil costs, which had soared 27 percent to 543.8 million euros.

In addition, the weak economic outlook for Europe had restrained growth.

"There is no sign of a European-wide economic recovery, … and no light at the end of the tunnel," Ryanair's chief financial officer, Howard Millar, told Reuters Insider TV.

Millar also announced that Ryanair would ground 80 of its 270 planes over the winter, adding that in view of oil prices at $100 per barrel "it really doesn't make sense to fly these aircraft."

Despite the problems, Ryanair said that it would maintain its profit outlook of between 400 million euros to 440 million for 2012.

Air France-KLM flies into the red

Even worse hit by the crisis in the airline business is Franco-Dutch airline operator Air France-KLM which reported a steep loss of 895 million euros ($1.1 billion) in the second quarter of 2012.

The result compares unfavorably with a loss of 197 million euros a year earlier, but was primarily the result of "restructuring provisions" to the tune of 368 million euros, the airline said Monday.

In January, Air France-KLM announced a three-year restructuring plan, seeking to eliminate 5,122 jobs with the aim of saving 2 billion euros by 2015.

Group chairman Jean-Cyril Spinetta said that uncertainty in the global economy, coupled with oil prices and exchange rate volatility, would make improving the group's productivity "even more necessary."

Air France-KLM's revenue rose 4.5 percent to 6.5 billion euros, lifted by a 2.4 percent increase in passenger numbers to 55.4 million in the second quarter. But cargo was down 6.9 percent in the three months.

Germany's national carrier Lufthansa will release its results for the second quarter on Thursday.

Analysts are eager to learn how Europe's biggest airline is faring after announcing it would cut 3,500 jobs in view of a record loss of 425 million euros in the first quarter of 2012.

uhe/slk (AFP, AP, Reuters)

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