Ryanair

Ryanair defeats European recession and posts all-time annual high net profit, but outlook less rosy

In spite of high oil prices and a Europe-wide economic recession Ryanair further distanced itself from its full service peers and reported a remarkable 25% increase in net profit for FY2011/12 to a record EUR503 million. Operating profit lifted 40% year-on-year to EUR683.2 million. Much to the annoyance and envy of Lufthansa and certainly Air France-KLM Group, which both recorded a deterioration of their financial performance in the most recent financial year, Ryanair improved its net margin by 1ppt to 12% and was able to maintain its operating margin at 14%. This is well above the EBIT margin performance of Europe’s full service carriers. Air France-KLM’s operating margin was negative in FY2011 while Lufthansa Group’s adjusted operating margin came in a 3% and IAG’s operating margin also reached a meagre 3%.

UK carriers rush to snap up bmibaby’s planned route closures

British Airways (BA) is preparing to disband bmibaby, the low-cost unit it unwelcomely acquired from bmi after previous owner Lufthansa failed to find a buyer. But as the saying goes: one man’s meat in another man’s poison and the news of bmibaby’s grounding was welcomed by multiple airlines including Monarch, Flybe and Jet2.com, all of which are swiftly stepping in to backfill capacity.

Anemic-turns-dynamic is not exclusive to bmibaby’s network but a development seen following the recent demise of other small- and medium-sized airlines in Europe such as Spanair, Malev and Cimber Sterling. In those cases, competitors have reacted swiftly and within a couple of days to fill the void.

bmibaby’s closure is indicative of a recent development in Europe: the lavish injection of capital in loss-making carriers is coming to a standstill with public and private shareholders alike halting the operations of these entities, mostly small- and medium sized airlines, a trend long overdue and induced by low or no economic growth in most EU countries implementing stark austerity measures, and high fuel prices.

Brussels Airlines to benefit from changed EU law that levels playing field for airlines

Brussels Airlines will benefit from ongoing European Union legal changes that it argues will level the playing field for nationally based legacy carriers compared to European-wide low-cost carriers which establish outside their home bases. Under previous legislation, airline employees were subject to taxes and social security rules of their company’s home, and not their operating base. That meant, for example, that Ryanair staff in Belgium paid lower taxes and had a competitive advantage against Brussels Airlines staff even though living in the same country.

This disadvantage was pushed into the limelight recently by what Brussels Airlines deems was misinterpretation by the foreign press that the airline would move headquarters to a more favourable labour location like Luxembourg. The airline affirms it has no intention to move its staff or headquarters. Brussels Airlines will continue to call its namesake city home.

Iberia Express launches as Europe’s latest salvo to bring short-haul model to profitability

New carrier Iberia Express has launched services despite its website not launching until later this week, and even then bookings will be accepted for travel only as early as 10-Apr-2012. The unusual arrangement is indicative of what Iberia Express is: a wholly-owned subsidiary of Iberia that will replace some of mainline Iberia’s short- and medium-haul routes. In its initial weeks it is taking over flights sold as Iberia, but passenger perceptions will be few; service is almost identical to Iberia – but with staff employed at market rates, drastically cutting costs.

Iberia for some years now has been in dispute with its over-paid staff – some of its short-haul pilots earn more than British Airways’ long-haul pilots – a problem that has compounded Iberia’s short-haul network which faces intense competition from low-cost carriers amidst rising fuel prices. The struggle of a European legacy carrier’s traditional short-haul network is not unique to Iberia and across the continent many alternative models are being explored, with none yet to emerge as successful and resistant to challenges.

The world's biggest airlines cautious with capacity growth in March

The world's airlines are being cautious with their capacity deployment in 2012, the latest figures from Innovata show. Carriers increased their capacity by 3.6% during in March, which is slightly above IATA's latest forecast for full-year capacity growth.