Some of Europe’s largest airline groups have unveiled their Q1 financial results in the past week, serving up a varied set of earnings but nevertheless giving credence to IATA’s prediction that 2016 will see a jump in the continent’s profitability.
For some, reduced fuel prices and higher customer demand are still aiding improved performance for airlines. Leading the way was International Airlines Group (IAG), parent company of British Airways, Iberia and Aer Lingus, which hailed a “good” first quarter which saw a profit of €104m ($118.5m) compared to a €26m ($30.1m) loss it reported in the same period last year.
On the other hand, two other large European airline groups, Air France-KLM and Lufthansa, both posted net losses of €155m ($178m) and €8m ($9m) respectively. While Lufthansa’s loss was a small one, Air France-KLM’s shortfall is more intriguing. Despite the gloomy numbers on paper, its losses were significantly narrowed from last year’s €559m ($642m) and renews hope that the fortunes of the French-Dutch airline could be about to turn around.
Further cause for optimism was given on Monday (May 2) due to the fact that one of Europe’s perennial strugglers of the past decade, Alitalia, could also about to see a reversal in its fortunes.
As discussed in yesterday’s Talking Point, the airline confirmed it had reduced its losses by €381m ($441.1m) for last year and predicted a return to profitability by 2017.
Should this come off, then it would be an impressive feat for an airline beset by a string of heavy losses in recent years which led it to the verge of bankruptcy in 2014 before Etihad bought a stake. Despite the early but slow signs of a reversal for the likes of Air France-KLM and Alitalia, questions which could influence future profitability remain about European commercial aviation.
First, one of the most asked questions of the past year is for how much longer can airlines rely on lowered fuel prices to carry their results?
More queries also remain on the topic of new alliances. Having touched on the “will it ever happen?” issue of European airline consolidation recently following speculation of UK-based Monarch being acquired, there’s no doubt some of the continent’s carriers would have looked across the Atlantic enviously at the resurgence of their US counterparts and will look to consolidate in some form.
Having garnered the opinions of a number of industry consultants in recent weeks, it is believed that fuel prices will stay low for the foreseeable future, airlines will focus on slashing labour costs and consolidation in Europe, whenever it decides to occur, remains inevitable. Airlines will be hoping a turnaround from annual loss makers to sustained profitability is also a cert.