Two major airlines report annual losses while a third carrier announces a 64 per cent drop in profits.
Hard times in the skies
Two major airlines today reported annual losses while a third carrier announced a 64 per cent drop in profits. The Hong Kong-based carrier Cathay Pacific reported a net loss of US$1.1billon (Dh4bn) for 2008, on the back of falling cargo demand and volatile fuel prices. Irish airline Aer Lingus also made a pre-tax loss of $151.4m last year, compared with a profit of $158m in 2007. Meanwhile, the German carrier Lufthansa said its 2008 net profit fell 64 per cent to $760m and it expected a further drop this year.
Cathay Pacific said in a statement to the city's stock exchange that high oil prices in the first half of the year had hit its bottom line. It added that the tumbling oil price in the second half of 2008 had also led to heavy losses from hedging contracts taken out to protect it against the high cost of fuel. "Having made a painful adjustment to high fuel prices, the aviation industry now has to adjust to a severe economic downturn," said the airline's chairman Christopher Pratt in the statement. "Cathay Pacific expects an extremely challenging year in 2009."
Aer Lingus blamed its losses on staff cost restricting and defence against a takeover bid by the low-cost carrier Ryanair. In a "weak and rapidly deteriorating operating environment," the airline said it will experience a larger operating loss this year and "is unlikely to meet its previous guidance of a pre-tax profit in 2009". The airline said passengers are increasingly booking later and lower fares are necessary to ensure load factors remain stable.
The Aer Lingus chief executive Dermot Mannion said aviation trading conditions were "exceptionally challenging" last year. "For Aer Lingus, falling consumer demand in key markets, a weakening dollar and sterling, and increased competition across the network combined to put sustained and significant pressure on our business throughout the year. "Record highs and volatile movements in fuel prices also had a significant negative impact on the business," he said.
Lufthansa said it expected to make a profit this year but it would be smaller than the one in 2008. The 2008 outcome "represents an outstanding result and its quality is underlined by the fact that it has been achieved during a time of global economic crisis," the German airline's chairman and chief executive Wolfgang Mayrhuber said in a statement. *AFP