Analysis

Southwest beats unit costs estimates despite posting a first quarter loss

20 April, 2012

A first quarter loss at Southwest Airlines was accompanied by a better-than-expected result in the carrier’s unit cost performance driven in part by labour productivity improvements. The carrier is striking a cautiously optimistic tone regarding the rest of the year, indicating it should record a favourable financial performance if fuel prices remain at current levels. But until Southwest completes the integration of AirTran Airways into its operations by 2014, the carrier will be constrained in reaching its full revenue potential.

Favourable gains on the settling of certain fuel hedge contracts helped Southwest to record a first quarter profit of USD98 million. But excluding special items the carrier’s loss was USD18 million compared with a USD20 million profit the year prior. The airline’s operating income tumbled USD100 million to USD10 million as the carrier recorded fuel and oil expense of USD1.5 billion, a 45.5% rise from 1Q2011. On a combined basis with AirTran, Southwest’s operating revenue was USD86 million.

Etihad Airways nears USD1 billion revenue as quarterly growth slightly outpaces capacity

5 April, 2012

Following Etihad’s first annual profit, the Abu Dhabi-based airline reported revenue jumped 28% year-on-year for the three months to 31-Mar-2012, to a record USD989 million.

The increase corresponds to a 27.4% surge in passenger traffic in the quarter, up by just over half a million passengers, indicating Etihad is growing revenue very slightly ahead of capacity growth. Etihad Airways added new services to Tripoli, Shanghai and Nairobi during the quarter, with passenger numbers reaching 2,360,000.

Lufthansa reports positive 2011 result despite challenging year

16 March, 2012

The Lufthansa Group has reported a positive overall result for 2011 with an operating profit of EUR820 million. But this represents a EUR200 million drop in operating profits compared to 2010 as the airline dealt with weaker economic conditions within the EU, rising fuel prices and increasing regulatory pressures through environmental taxation. 2012 will see the Group search for synergies and cost savings under its 'SCORE' programme, and increased attention will be paid to Austrian Airlines as it attempts to return to profitability through restructuring.

Lufthansa Group’s revenue in 2011 rose 8.6% to EUR28.7 billion. The Group incurred a net loss of EUR13 million but this was driven by a EUR285 million loss “from discontinued operations”. This resulted from the Group’s sale of bmi to the International Consolidated Airlines Group (IAG) in late Dec-2011.

Cathay Pacific profit falls, but from a record level as it manages very well in a tough environment

14 March, 2012

Cathay Pacific’s financials in 2011 were never going to compare well to a fantastic 2010. Headline revenue were up 9.9%, but net profits fell 60.8% and profit margin dived 10.1 ppts to 5.6% from the previous year’s record 15.7%. Cathay cited the the instability of the global economy, the weakness of the air cargo market, the reduction of yields in economy class, the impact of natural disasters in Japan and Thailand, unrest in the Middle East and continued high jet fuel prices for the result – and predicted tougher times in 2012.

But in the circumstances, and relative to its peers, Cathay is performing well and is an extremely well managed airline. Over the past three years, management has reduced unit costs per ATK by 9.2%. Singapore Airlines has seen a 0.5% increase over the same period.

Air France-KLM reports deep operating loss for FY2011, needs “Transform 2015” plan to deliver

9 March, 2012

Air France-KLM has reported an operating loss of EUR353 million for 2011, a significant turnaround from its 2010 profit of EUR28 million - and follows Lufthansa's 18% year-on-year decline in operating profit to EUR820 million last year. This has been a difficult year for the Franco-Dutch airline group, as it battled rising fuel prices and uncertainty across many of its markets. The start of 2012 saw the Group launch ‘Transform 15’, its turnaround programme aimed at restoring profitability. The 2011 loss emphasises the need for this programme to deliver results, given a continuing uncertain outlook as Europe's economic troubles persist amid high fuel prices.

The Group’s revenue was unable to absorb rising fuel expenses; although total revenues increased by 4.5% year-on-year to EUR24.36 billion, operating costs rose 6.2% to EUR24.72 billion. Fuel expenses alone surged 16.3% year-on-year.

IAG reports strong result despite higher fuel prices. But Iberia Express fills the windscreen

1 March, 2012

International Consolidated Airlines Group (IAG) reported a strong FY2011 result with profit more than doubling year-on-year despite its fuel expense increasing nearly 30%. British Airways led the strong result while Iberia still struggled. The 2012 outlook for the Group remains uncertain due to weak European markets and labour unrest in addition to rising fuel expenses.

IAG reported full year operating profit of EUR485 million and net profit of EUR527 million. Fuel expenses rose 29.7% to EUR5.1 billion. Passenger revenue outgrew capacity increases with 11% higher revenue and capacity increase of 7.1%. Unit passenger revenue rose 3.6% with overall unit revenue up 3.1% while premium traffic saw good growth of 5.7% and outgrew non-premium revenue growth. Despite increases on the passenger side of the business, cargo revenue remained constant.

Bullish AirAsia reports 2011 profit and accelerates expansion

23 February, 2012

AirAsia has posted another year of profits across all three of its short-haul operations as the group continues to outperform nearly every low-cost and full-service carrier in Southeast Asia. AirAsia Group’s outlook for 2012 is again bright despite high fuel prices and challenging economic conditions. With IPOs planned for its Indonesian and Thai affiliates plus the launch of two new affiliates in the Philippines and Japan, 2012 promises to be another big year for AirAsia. Another milestone will also be reached this year as the group’s all-Airbus A320 fleet surpasses 100 aircraft.

AirAsia Malaysia, Thai AirAsia and Indonesia AirAsia all ended 2011 in the black from both an operating and net perspective. The Malaysian carrier posted “core net income” of MYR881 million (USD291 million), an increase of 18% from 2010, as revenues increased 13% to MYR4.47 billion (USD1.48 billion). Thai AirAsia turned a core net profit of THB1.909 billion (USD623 million), an increase of 14%, as revenues surged 33% to THB15.87 billion (USD520 million). Indonesia AirAsia recorded a core net profit of IDR149.654 billion (USD17 million), which represented a 53% drop compared to 2010 as revenues soared by 34% to IDR3.705 trillion (USD411 million) (see Background information).

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