Asia-Pacific Airlines battered by heavy losses

November 16, 2009

By Amado Macasaet

The airline industry all over the world has been battered by heavy losses – some in the billions of dollars – caused by the recession and higher prices of aviation gas.

The recession that set in early last year reduced the number of airplane passengers by an average of higher than 15 per cent. Fuel costs, however, have been steady at higher levels.

In some cases, the losses were made heavier by operating non-airline activities like catering, ground-handling, information technology and reservation services.

These operations are manpower intensive but do not produce desired profits.

A reduction in the number of passengers is the main reason for the huge losses. Non-aircraft activities have their own share, according to information obtained by Malaya Business Insight.

The airlines in Asia seem to have incurred the heaviest losses. Garuda Airlines of Indonesia, for example, took a loss of $4.3 billion last year.

Data obtained from various sources show that Garuda has 66 aircraft. It has options to buy 60 more. It employs 9,000 people.

Cathay Pacific with a large fleet of 123 airplanes, not including orders for 36 more, reported a full-year ending March 2009, loss of $1.104 billion. This is the first time that Cathay lost that much money since the 1997 financial crisis.

The airline had to scrap planned dividends. It was locked in higher fuel prices than prevailing in the market. It hedged wrong.

Thai Airways with 88 airplanes which flew almost 20 million passengers last year took a loss of close to $600 million on revenues of $5.68 billion.

Japan Airlines is one of the largest in the world with a fleet of 185 aircraft plus orders for 57 more and options for another 20. It reported losses of one billion dollars.

All Nippon Airways (ANA) posted sales of $1.7 billion from 216 aircraft, but the decline in the number of passengers for the entire industry, resulted in a loss of $306 million.

ANA has 77 destinations.

Among all the airlines in the world flying international, Philippine Airlines has the smallest fleet of 39 aircraft but it has 8,000 workers in its payroll.

PAL has 110 departures for its domestic operations and 45 for international routes. It reported gross revenues of $1.55 billion but posted a loss of $301 million.

The Philippine flag carrier flew 5.4 million domestic passengers and four million passengers for foreign destinations.

PAL has only 24 foreign destinations, most of which are in Southeast Asia, and 18 domestic routes. In fact, PAL’s longest haul is limited to the West Coast and Vancouver in Canada. The Vancouver flight goes as far as Las Vegas.

United Airlines of the United States flies 45 million passengers on its 409 aircraft which have 200 destinations.

It reported revenues of $2.02 billion but incurred a loss of $63 million.

Continental Airlines raked in revenues of $15 billion from its 604 airplanes but like most of the airlines in the world, reported a loss of $18 million although it has 262 scheduled destinations and 2,423 daily departures.

Continental has five hubs in New York, Newark in New Jersey, Houston in Texas; Cleveland in Ohio and Guam.

Lufthansa has a large fleet of 534 aircraft that flies more than 70 million passengers a year. Its revenues last year amounted to $33.86 billion but reported a loss of $300 million.

British Airways has orders for 51 aircraft to add to its existing 234. Like the other airlines, it reported a loss of $554 million.

Qantas, the Australian airline, reported a loss of $341 million on its 239 aircraft

An official of a foreign airline with offices in Makati explained that fuel accounts for the heaviest cost averaging 40 per cent of total.

When prices of aviation gas go up, fuel costs are magnified.

The airlines in the Middle East have a competitive edge over all the airlines in the world. Their fuel costs is only 30 per cent of total operating costs.

Their respective governments give fuel subsidies.

The official said deliveries of new aircraft will either be delayed or cancelled until such time that air travel goes back to normal.

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