Europe Airline Daily: Main News: 30 April 2008

Ryanair: “BA is buying fuel at USD40 less than current market rates and is 60% hedged at USD79 per barrel until the end of June. Today’s increase is just another BA rip-off as its fuel surcharges are unavoidable and applied to every single ticket. British Airways GBP79 fuel surcharge [long-haul services > nine hours] is more than twice the cost of Ryanair’s average fare of GBP30. There is no justification for imposing this price hike, which passengers cannot avoid”, Peter Sherrard, Spokesman. Source: Ryanair, 29-Apr-08.

Lufthansa CEO, Wolfgang Mayrhuber, confirmed comments by the airline’s CFO this week that Lufthansa would exercise its option to acquire a majority shareholding of bmi in two stages in the next two years (Reuters, 29-Apr-08). Mr Mayrhuber confirmed the timing and price had already been agreed with bmi majority owner, Sir Michael Bishop, and funds had been set aside for the acquisition. Mr Mayrhuber did not comment on speculation that Lufthansa is considering the purchase of Brussels Airlines, following a report in Handelsblatt.

Lufthansa: “So far I have heard speculation that we are going to merge with everyone except for Air France-KLM…We want to be active [in industry consolidation], we will be active, but we will not let ourselves be drawn into something that will end up harming the company…We will keep a cool head," Wolfgang Mayrhuber, CEO. Source: Thomson Financial/Reuters/Dow Jones, 29-Apr-08.

Brussels Airlines confirmed it is in talks with various partners to join a global airline alliance and is open for a possible change of ownership (Reuters, 29-Apr-08).

Brussels Airlines: “A possible financial participation of a new shareholder could only be considered under the condition that the sustainable future, the identity and the autonomy of Brussels Airlines are guaranteed. As to the rumours that are currently circulating on the issue of consolidation in air traffic, the company will abstain from further comments”, Media Statement. Source: Brussels Airlines, 29-Apr-08.

Alitalia's survival prospects received a boost with the Chairman of Pirelli & C, Marco Tronchetti Provera, stating the company is prepared to invest “a few million euros” in a proposed Italian consortium that could make a bid to take over the airline and protect the interests of Milan Malpensa Airport (Reuters, 29-Apr-08). Italian Prime Minister-elect, Silvio Berlusconi, is encouraging the creation of a consortium made up of Italian investors, including Italian airline, Air One, plus the Russian national carrier, Aeroflot, to revive Alitalia. The consortium could be ready within 3-4 weeks, according to Mr Berlusconi. Alitalia's services affiliate, AZ Servizi, could reportedly be sold off to a state holding company. Meanwhile, Mr Berlusconi threatened to re-nationalise the carrier if the EU attempts to block an EUR300 million emergency government loan aimed at preventing Alitalia from entering bankruptcy protection.

Pirelli & C: “For Alitalia, we are ready to make a contribution, clearly a few million euros if there is a clear and transparent plan for Malpensa, that protects the economic interests of the country and also of Pirelli. If Malpensa was closed, it would cost millions of euros. Therefore, in the face of this cost and of a lower presence of operators and insignificant plans for Malpensa, we have made ourselves available and given our name,” Marco Tronchetti Provera, Chairman. Source: Reuters, 29-Apr-08.

Silvio Berlusconi: "If [the EU] starts being a pain in the neck, we could take a decision whereby Alitalia could be bought by the state, or the state railway," Source: AP, 29-Apr-08.

British Airways announced (29-Apr-08) plans to increase fuel surcharges, effective 02-May-08:

• Short-haul service: Increase from GBP10 to GBP13
• Long-haul services (less than nine hours duration): From GBP53 to GBP63;
• Long-haul services (greater than nine hours): From GBP64 to GBP79;
• Offshore sales: The airline stated it would increase its fuel surcharges by similar levels in markets outside the UK.

Airbus CEO, Tom Enders, confirmed the manufacturer is conducting a major review of delivery targets for the A380, and remains confident of meeting them (Reuters, 29-Apr-08). Airbus aims to deliver 13 A380s in 2008 and 25 in 2009. Emirates President, Tim Clark, stated he is confident of taking delivery of four A380s by the end of 2008 and a fifth by Mar-09.

Airbus: "This is a battle…I am currently conducting a major review of the ramp up plan…[it] might well be that we achieve [our A380 delivery targets]. This is a very steep ramp up and this is something one always needs to be concerned about and audit. The industry has multiple supplier problems and stuff like that obviously has to be taken into consideration as well. There will be no miracles", Tom Enders, CEO. Source: Dow Jones/Reuters, 29-Apr-08.

European Union and Australia signed (29-Apr-08) signed a horizontal agreement that removes nationality restrictions in the bilateral air services agreements between EU Member States and Australia. The agreement allows any EU airline to operate services between any EU Member State where it is established and Australia.

European Commission: “This will pave the way for a comprehensive aviation agreement involving cooperation in key aviation areas such as competition, safety and the environment”, Jacques Barrot, Vice President Transport. Source: European Commission, 29-Apr-08.

Lufthansa CEO, Wolfgang Mayrhuber, stated the outlook for the aviation industry was "good" and confirmed the carrier is confident of reporting another record operating profit in 2008 (Reuters, 29-Apr-08). Mr Mayruber also confirmed he would retire at the end of 2010.

Lufthansa: “"We have enough thrust for another ascent and we have the flexibility to slow down in case of downwash. The record-breaking year 2007 will not be a one-hit wonder…The uncertainty on financial markets, oil prices at record levels, the possible consolidation of air traffic in the United States and the unbroken rapid expansion course of the Gulf carriers [are] challenges”, Wolfgang Mayrhuber, CEO. Source: Reuters, 29-Apr-08.

The Conference Board’s US Consumer Confidence Index, which had declined sharply in Mar-08 to 65.9, fell further in Apr-08 to 62.3 (1985=100). The Conference Board stated, “this continued weakening suggests that not only has the feeble level of growth in the first quarter spilled over into the second quarter, but that economic conditions may have slowed even further. The percentage of respondents intending to take a vacation over the next six months has fallen to a 30-year low, another sign of consumers turning more cost conscious. Looking ahead, consumers' outlook for the economy, the job market and their income prospects remains quite pessimistic and little changed from last month. Or, in other words, the glass remains half empty”.

Aer Lingus announced it has awarded two new ten-year maintenance contracts for its A320 and A330 fleet to Sabena Technics and Sogerma Services, both subsidiaries if the TAT Group, effective 01-Nov-08 (rte.ie, 29-Apr-08). The carrier estimates the new contracts will result in maintenance cost reductions of approximately EUR20 million p/a, and form part of a larger overhaul of the carrier’s maintenance arrangements.

Air Southwest, a UK regional airline, commenced daily services connecting Newquay, one of its two main bases in Devon and Cornwall in Southwest England, with Newcastle, in the Northeast of the country (Shields Gazette, 29-Apr-08). The airline is owned by Plymouth based Sutton Harbour Holdings, whose interests span coastal and urban regeneration as well as regional aviation. It operates a small fleet of 50-seat Dash-8 aircraft.

easyJet stated (29-Apr-08) it expects to handle 450,000 passengers over the May Bank Holiday period.

easyJet announced (29-Apr-08) plans to launch four times weekly Manchester-Alicante service on 29-Sep-08 – see Route Changes Table for more information.

Finnair Group reports (29-Apr-08) the following financial/traffic highlights for the three months ended 31-Mar-08:

• Revenue: EUR576.5 million, +9.1% year-on-year;
• Operating profit: EUR12.1 million, -11.7%;
• Net profit: EUR5.5 million, -40.9%.

Finnair Group: “[The outlook for] demand is expected to continue to be moderate in the early part of the year. Passenger load factors are expected to be slightly lower than last year's figures, due to an expected slowing of European traffic growth and efforts to increase the average price of flight tickets as fuel costs rise…The operational result for the first half of the year is expected to be at the previous year's level,” Company Statement. Source: Finnair Group, 29-Apr-08.

SAS Group reports (29-Apr-08) the following financial highlights for the three months ended 31-Mar-08:

• Revenue: EUR1,371 million, +6.3% year-on-year;
• Net profit (loss): (EUR121 million), compared to a net loss of EUR5.0 million in the corresponding period last year;
• Passenger numbers: 7.3 million, +2.6%;
• Passenger load factor: 67.8%, -0.2 ppts.

SAS Group: “The negative earnings trend we experienced in Nov-07 and Dec-07 continued in 1Q08. The primary reason for this is the rapid rise in jet fuel prices to record high levels that could not be offset, while unit earnings fell as a result of further intensification of competition. There is also certain overcapacity in the market and tendencies toward a decline in business travel...We have seen how companies in the local market have adjusted their forecasts downward at the same time as carriers in the US and Asia have filed for bankruptcy. Consolidation in the industry on a global scale is continuing with full force,“Company Statement. Source: SAS group, 29-Apr-08.

Donbassaero, a Ukranian carrier based in Donetsk, launched Donetsk-Moscow Domodedovo service on 27-Apr-08 – see Route Changes Table for more information. The carrier plans to increase frequency on the route from two to six times per week, effective 19-May-08.

Macedonian Government stated it would lodge a complaint in the EC against Greece after the country allegedly blocked a Macedonian Air Transport aircraft from using Greek airspace, enroute to Sharm el-Sheik (AP, 29-Apr-08).

Macedonian Government: "We ask that politics remains politics, and business remains business. Of course, Macedonia will use every means at its disposal to protect the Macedonian carrier," Ivica Bocevski, spokesman.

Wizz Air announced plans to establish a new base at Kiev Boryspil Airport, becoming the first LCC to operate within Ukraine (ukrainians.ca, 29-Apr-08). Wizz Air will initially operate domestic services only, to destinations including Odessa, Lviv, Simferopol, Kharkov and Zaporozhye, from 11-Jul-08.

Air Algerie stated it is considering alliances with several African airlines either by way of equity stakes, alliances or cost sharing (Reuters, 29-Apr-08). Air Algerie's main overseas routes are to Europe and the Middle East, with the airline also experiencing increasing demand in West Africa.

Air Algerie: "We would like to start by either taking a share in the capital, doing alliances under which we would share markets, or doing cost sharing," Abdelwahid Bouabdallah, CEO. Source: Reuters, 29-Apr-08.

Tunisair signed (29-Apr-08) a firm order for ten A320s, three A330-200s and three A350-800s. Tunisair currently operates 12 A320s, four A319s and three A300-600s.

United Airlines CEO, Glen Tilton, confirmed the carrier will still pursue “all options” to ensure financial viability (Financial Times, 29-Apr-08). United and Continental Airlines ended merger discussions last week. United is reportedly in “advanced” negotiations with US Airways. Meanwhile, United Airlines’ pilots union Chairman, Steve Wallach, stated (29-Apr-08) a merger between United and US Airways would be “extremely negative” for United. Additionally, Jay Pierce, Chairman of Continental Airlines’ pilots union, has supported the carrier’s decision not to pursue any mergers at this time.

United Airlines: “Consolidation is under way. Ensuring you have the right partner is everything. We will pursue all options to ensure a strong, sustainable future for our airline and will not shy away from the tough choices,” Glenn Tilton, CEO. Source; Financial Times, 29-Apr-08.

Air Line Pilots Association: “United pilots share the market's view that a merger with US Airways would be extremely negative from United's perspective. While United has its own problems and issues… US Airways' problems run even deeper.” Steve Wallach, Chairman of the United Master Executive Council of the Air Line Pilots Association. Source: Media statement, 29-Apr-08.

Panalpina reports (29-Apr-08) the following financial highlights for the three months ended 31-Mar-08:

• Revenue: EUR1,582 million, +5.6% year-on-year;
• Operating profit: EUR264.1 million, -2.2%;
• Net profit: EUR20.0 million, -39.7%;
• Air freight tonnage: +4.4%.

Panalpina: “The quarter result is comparable to first quarter results of other years. Operating results of 2008 are therefore from this perspective satisfying,” Monika Ribar, CEO. Source: Panalpina, 29-Apr-08.