TRAVEL: Turbulence for airlines as demand falls

Tales of woe continue to emanate from the airline sector, with a number of global airlines reporting losses or major declines in profitability for 2008.

With the worldwide downturn sapping demand for air travel, casualties of the sector include Hong Kong carrier Cathay Pacific, which reported a net loss of US$1.1 billion (£802 million) for its full year, attributing the poor performance to flagging demand for flights and the escalating fuel price at the beginning of 2008. This loss was worse than expected and compared with a $900 million profit in 2007.

Net profits at Lufthansa reduced by two-thirds to $758 million, a highly significant reduction from the $2.1 billion made the previous year, although the company, bossed by Wolfgang Mayrhuber, has to take some credit for remaining profitable.

Irish mover and shaker Aer Lingus unveiled a swing from profits of $133 million in 2007 to losses of $136 million last year, blaming the weak and rapidly deteriorating operating environment for its performance and warning that it was unlikely to hit 2009 profit targets.

CEO Dermot Mannion added that, as well as flailing demand amid the consumer ranks, the company was affected by ‘a weakening dollar and sterling’, and increased competition in the market.

Among London’s quoted companies, the effects of the tough trading environment were illustrated by interim results to January from private aviation player Air Partner, whose profits were reduced by 17 per cent to £3.2 million on sales of £107 million. Remaining debt free and cash generative, the company was able to increase the interim dividend by ten per cent to 8.1p.