European Airlines Post Second Quarter LossesAugust 3, 2012 By: Jena Tesse Fox
The second quarter is over, and Europe's airlines are posting some worrying financial figures.
According to the Associated Press, the owner of British Airways and Iberia has reported a second-quarter loss due to a fall-off in business at the Spanish carrier. For the three months ending June 30, International Consolidated Airlines Group reported a loss of $116 million compared to a profit of $46 million a year ago. Revenue was up 14 percent to $4.8 billion, and fuel costs were up 25 percent to $1.9 billion.
Iberia posted an operating loss of $324 million in the first half, while British Airways managed an operating profit of $16 million.
The company said that industrial action by employees, higher fuel prices, the negative impact of exchange rates and economic weakness in Spain had all contributed to Iberia's losses, which are expected to continue for the rest of the year.
Likewise, in another AP report, German flag-carrier Lufthansa blamed high fuel costs and new taxes on air travel in its home and Austrian markets for a 24 percent decline in second-quarter earnings.
Deutsche Lufthansa AG said that net earnings fell to $270 million from $371 million a year earlier. Revenue grew by 6 percent to $9.7 billion and the number of passengers between April and June rose slightly to 27.5 million.
The Lufthansa group includes Austrian Airlines and Swiss. The Cologne-based company also holds stakes in Brussels Airlines and JetBlue of the United States.
The earnings were bolstered by progress in restructuring ailing Austrian Airlines, which saw an operating profit of $32 million in the first half of the year. That compared with a loss of $78 million a year earlier. Lufthansa did not disclose quarterly figures for the unit.
For the record, the results beat the consensus expectation for net profit of $188 million among analysts surveyed by FactSet.
Now the question remains as to what the airlines will do to remain in the black. Earlier this week, United raised its fares by approximately $10 per round-trip ticket. Will Europe's airlines follow suit if it means a return to profitability?