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Aviation companies operate in loss

06 August 2011 07:35 (UTC +04:00)

Baku â€“ APA-Economics. Airline-industry earnings suffered the first year-to-year decline for two years in the three months to June as fuel costs rose and capacity increases outstripped demand, the International Air Transport Association said yesterday.

Early figures for 16 carriers showed operating profit shrinking by one-third and net income tumbling by almost two- thirds, IATA said in a report. North America, the Asia-Pacific region, and Latin America are all showing declines, while European earnings advanced only because traffic disruption caused by a volcanic ash from Iceland crimped profit last year.

Delta Air Lines Inc., the worldâ€™s second-biggest carrier, posted a second-quarter profit before items of $366 million, or 43 cents a share, trailing the 44-cent average estimate of analysts. Singapore Airlines Ltd., the second-biggest airline by market value, also failed to meet predictions.

Meanwhile Air France-KLM Group, Europeâ€™s biggest carrier, fell the most in five months on July 28 after posting an operating loss of $207 million when analysts had expected a profit.

Jet fuel prices headed above $130 a barrel in July, IATA said yesterday, and though passenger traffic is still rising at a 4 to 5 percent annual rate, capacity increases are outpacing demand, resulting in June load factors, or seat-occupancy levels, that were 1 percentage point below 2010â€™s high.

A deterioration in consumer confidence and the economic outlook is putting third-quarter earnings under further pressure, with a possible slowdown in business travel, which has so far spurred traffic in 2011, posing a â€œworry,â€™â€™ IATA said.

Michael Oâ€™Leary, chief executive of Ryanair Holdings PLC, Europeâ€™s biggest discount carrier, said the combination of rising fuel costs and slumping confidence will quicken the pace of consolidation within the industry.

â€œThereâ€™s going to be more bankruptcies within the European airline sector and more amalgamations,â€™â€™ Oâ€™Leary said at a press conference in Dublin yesterday.

The 31-member Bloomberg World Airline Index has slumped 4.8 percent this week to the lowest in more than a year.