CHARM OFFENSIVE - Orient Aviation

N E W SBUSINESS round-upQantas results ‘aconsiderable achievement’After six successive years of record profits,Qantas Airways announced inAugust a 19.7% fall in net profit toA$415.4 million (US$220.2 million) for theyear to June 30. As the national airline hashad to contend with a price war in the domesticmarket, high fuel prices, a slowing inthe home and international economies anda weak Australian dollar, chairman MargaretJackson described the result as a “considerableachievement” and “a significant profitat a time when the global aviation industry isexperiencing unprecedented change and manyairlines around the world are reporting lossesor small profits”.Revenue for 2000-2001 was A$10.2 billion,an increase of 11.9% on the previous year.Revenue passenger kilometres rose 10%.Capacity grew 9.3%. The overall passenger seatfactor rose half a percentage point.Fuel prices took a heavy toll on costs. Expenditurerose 14.9%, mainly due to fuel andcapacity increases. Although hedging contractssaved Qantas A$406 million, its fuel costs rose54.1% to A$466.6 million. Cost per availableseat kilometre decreased by 1.3%The airline’s chief executive, Geoff Dixon,said the results for the 2002 financial yearwould remain under pressure.In May, Qantas eliminated one source ofcompetition in the domestic market by acquiringno-frills carrier, Impulse Airlines, and leasingits eight Boeing 717-200s and 13 Beech-craftaircraft.Cathay profits plungeCathay Pacific Airways’ financial accountshave been on a roller coaster ride in the lastcouple of years. In 1998, the airline made itsfirst loss. Last year, it posted record profits ofHK$5 billion (US$641 million). In the first sixmonths of the current financial year the pendulumswung yet again with profits plungingand a forecast of worse to come.Cathay announced it had made a net profitof HK$1.32 billion for the half year to June 30.This was a 39.4% drop on the HK$2.18 billionrecorded in the same period last year. Its turnoverfell 1.9% to HK$15.84 billion.Last year Cathay’s cargo division proveda shining light on the balance sheet, but in2001 slow growth in the U.S., Japan and otherAsian economies impacted both cargo andQantas chairman Margaret Jackson: a significant profit achieved under pressurepassenger traffic.The performance would have beenworse had it not been for an exceptional gainof HK$452 million from the disposal of theairline’s shares in network communicationservices company Equant, which was acquiredby France Telecom.Significantly, the affects of the Cathaypilots’ “limited industrial action”, which startedin early July and at press time was still ongoing,will be reflected in the second half of 2001’sfinancials.During the first six months of the yearpassenger traffic rose 2.3% to 5.9 million, butthis was put in the shade by an increase of8.6% in seat capacity. As a result passengerload factor fell 3.8 percentage points to 71.9%.Cathay took delivery of five new aircraft in theperiod under review.Cargo volume fell by 5.2% to 340,000tonnes. Cargo load factors and yields fellsharply, said the airline.With the exception of fuel prices, whichrepresented 18.8% of operating expenses, up1.1% on a year earlier, Cathay’s unit costs peravailable tonne kilometre fell by 1.6%.KAL to cut staffSouth Korea’s two international carriers,Korean Air (KAL) and Asiana Airlines sufferedheavy losses in the first six months of their financialyears. KAL’s net losses were 345.9 billionwon (US$276.7 million), 74% higher than thesame period last year. The airline’s operatingloss was 149.4 billion won. Passenger sales rose5.4% to 2.73 billion won, but cargo revenue,which accounts for 27% of its business, fell 5%to 744.1 billion won. KAL said a depreciation ofthe won, abnormally bad weather and a pilots’strike had contributed to the result.To cut costs KAL, which shed 1,600 jobs duringthe Asian financial downturn, will lay-off afurther 500 staff in coming months, accordingto the Chosun Ilbo newspaper.To raise cash, KAL also will sell off anumber of its 114 aircraft and put a freeze onnew orders.Asiana posted losses of 156.3 billion won(US$125 million) compared to a net profit of60.95 billion won a year earlier. Operatingprofit fell 75% to 26.42 billion won. Asiana’ssales rose 7.3% to 1.05 trillion won.The airline is to continue a company-wide10% cost reduction campaign, started in February,throughout the year. Asiana sold twoaircraft in May and in July issued asset-backedsecurities worth 350 billion won. The airlinesaid it would not cut its workforce.CAL holds its ownTaiwan’s China Airlines (CAL) made a slightincrease in pre-tax profit in its first six monthscompared to the same period in 2000. Its profitof NT$1.09 billion (US$31.5 million) was upfrom NT$1.07 billion last year. Passenger revenue,however, rose markedly to NT$21.5 billionfrom NT$18.1 billion in the same period in2000. Cargo revenue was down from NT$11.4billion last year to NT$10.7 billion in 2001. Currencyhedging and the sale of two B737-800shelped the bottom line, said CAL. (See CharmOffensive, page 28)14 | Orient Aviation | September 2001