EUROPEAN LEGACY CARRIERS BOUNCE BACK TO PROFITABILITY

By Azeez Ajibosin

A thinner-better-than-fat

Prior to 2013, Europe’s economic depression did not spare the aviation sector because the economic downturn hit the continent’s legacy airlines very hard. Precisely, in 2012, France – KLM reported operating losses of $482 Million). Similarly, in the same year, International Airlines Group (I.A.G.) the parent company of British Airways and Spanish Iberia, reportred a  £23 million ($31.4 Million) loss.

however, due to both a better macro environment and cost cutting efforts, Europe’s legacy carriers bounce back to profitability in the year 2013, IAG posted  £770 Million ($1.1billion) profit while Air France – KLM registered operating profits of  £132 million ($180.2 million). Infact, transports experts are of the opinion that there is prospects for Europe’s major airlines and they are on track to post a better and stronger results this year.

 

This is because the European legacy carriers have emerged from the crisis leaner and more efficient, having cut cost and consolidated their flight offerings to focus on key International routes. The annual  operating profits projectd by European Economist bears an eloquent testimony that the continent’s three largest airline companies are on track to report positive earnings for the whole of 2014 which are as follows: Lufthansa  £1.7 billion $2.3 billion). Air France – KLM. £832 million ($1.1 billion) and for IAG is  £1.4 billion ($1.9 billion).

 

According to informed opinion of the experts, is that, with recovery comes the potential for over confidence and carriers tend to respond by increasing capacity. Consequently, it was projects that total capacity on transatlantic routes is prised to grow by 7 percent through 2014. Londoners Heathrow airport, Europe’s largest transatlantic hub, should see a 2 third quarter capacity respectively, according to credit suisse. In addition, U.S. based United Airlines and Delta Airlines are adding more flights at Paris’ Charles de Gaulle Airport, while Lufthansa and Air Berlin are increasing the number of seats available on flights out of New York’s John F. Kennedy International Airport.

 

Europe’s airlines are playing it safe by focusing on routes where they are already the dominant player rather than trying to challenge competitors in their strongholds. This careful finetuning “suggests low appetite to compete aggressively on price, despite capacity growth”, credit suisse explains. In the same vein, European carriers return to profitability remains shaky like the rest Europe’s economic recovery but for the first time in years, they seem to be on the right track.

 

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