AviationWeek.com/awst AVIATION WEEK & SPACE TECHNOLOGY/NOVEMBER 3/10, 2014 41
(€335 million) was substantially higher than the passenger
airline’s.
Pilot issues and high legacy costs are not the only worries
for Spohr. Lufthansa decreased its operating profit target
for 2015 and no longer expects to reach €2 billion, although
the result will be “well above” the €1 billion envisioned for
- The profit warning comes as Lufthansa sees overall
demand slowing as the economic crisis mode in some parts
of the world could afect demand for air travel.
According to CFO Simone Menne, the capital expenditure
for 2015 could come under scrutiny again. Lufthansa also has
reduced its expected capacity growth by a percentage point
to 3%. That growth is anticipated as the airline adds seats to
existing aircraft and introduces larger ones. But that direc-
tion could lead to accelerated retirement of Boeing 747-400s
and remaining 737 Classics as well as Bombardier CRJ900s
operated by Eurowings.
Neither Air France-KLM nor Lufthansa is considering
deferment of aircraft orders.
Air France-KLM, too, says it has the “firm intention” to
limit the financial consequences of the two-week strike by
its pilots in September through a series of measures, such
as reducing capital expenditures and increasing unit cost
cuts, but it stressed that no drastic measures or massive
layofs are planned.
“We can’t just pretend that nothing has happened,” says
Pierre-Francois Riolacci the group vice president for finance.
“The strike has added €400 million to €500 million of debt to
our balance sheet. There will be strong austerity measures
on our investment, we will take further action to reduce unit
cost, and we will be looking at our asset portfolio.”
To reduce capital expenditure, the company may revise its
fleet plans. Management has not yet firmed plans for long-
haul capacity growth for next year and increases in the sum-
mer 2015 schedule.
Riolacci admits that ofsetting the financial impact of the
Air France pilots’ strike to protest the establishment of a
low-cost subsidiary, Transavia Europe, will take longer than
six months. But he says the focus needs to be on proceeding
with the restructuring of the company and implementing the
Perform2020 overhaul plan.
The Franco-Dutch group’s third-quarter results were
strongly afected by the strike, which had an estimated nega-
tive impact of €330 million on the operating result. Total rev-
enues shrank by an estimated €416 million but were partly
ofset by €86 million of cost savings.
The third-quarter results were the worst since 2009. Net
profit fell to €100 million from €148 millon in the year-ago
period, but for the €187 million derived from the sale of Ama-
deus shares, the group would have reported a net loss. And
when excluding that one-of gain, net loss for the first nine
months has increased to €701 million from €651 million in the
same period of 2013. Air France-KLM reported a record €1.5
billion net loss last year. cgrowth in Australia’s international and domestic markets,
which had been a major headache for Qantas. Both Qantas
and Virgin Australia have backed away from a destructive
capacity war in domestic markets, and the lower Australian
dollar is making it less appealing for overseas carriers to add
flights to Australia. Mainline capacity for Qantas was down
slightly in the quarter, and while Jetstar capacity rose, the
hike was less than the increase in trafc.
Virgin Australia gave a more complete outline of its quar-
terly results, which reveal an airline still struggling to break
even. The carrier reported an underlying loss of A$45 mil-
lion for the three months through September—its fiscal first
quarter—and a net loss of A$59.1 million.
Like its rival Qantas, Virgin also lost money in the 2013-14
fiscal year, posting a net deficit of A$355.6 million.
CFO Sankar Narayan notes that the September quarter is
seasonally the weakest for Virgin Australia, although
it managed to improve its result by 18% versus the
same quarter a year earlier. Its overall capacity was
essentially flat.
Not included in the underlying result was Virgin
Australia’s share of losses from its majority-owned
low-cost carrier Tigerair Australia, which amounted
to A$11.6 million in the September quarter. On the
same day that it revealed its latest losses, Virgin
announced it is buying the remaining 40% of Tiger-
air Australia from Singapore-based Tiger Airways
Holdings.
While taking on a greater share of a loss-making
entity may seem counterintuitive, it is a strategic move which
is part of Virgin Australia CEO John Borghetti’s overall plan
to compete with the Qantas group in as many sectors as
possible.
As Virgin Australia has transformed into a full-service car-
rier, it has left the bottom end of the market to Qantas LCC
Jetstar. Gaining control of Tigerair Australia will allow Virgin
to battle Jetstar head-on. At the moment Tigerair only flies do-
mestic routes, but Borghetti says it may expand to short-haul
international markets in Southeast Asia and New Zealand.
Tigerair Australia has 13 Airbus A320s in its fleet. When
Virgin first bought into Tigerair, it said the LCC’s fleet could
grow to as many as 35, although it has more recently stated
that 20-23 aircraft would be optimal. Borghetti is now signal-
ing that the LCC’s fleet growth plans may be slowed further
due to soft domestic demand. cQantas is making its fleet more efcient
thanks to accelerated retirements and
increased aircraft utilization rates.
QANTAS
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