The tax burden on US airlines and passengers continues to rise, but not to the level regularly cited by airlines themselves as well as industry trade groups, according to the Ticket Tax Project, a joint effort of MIT's Global Airline Industry Program and Daniel Webster College.
A day after announcing the takeover of Swiss International Air Lines ( ATWOnline , March 23), Lufthansa Chairman and CEO Wolfgang Mayrhuber declared that Lufthansa Group is "leaner and stronger" as he confirmed final results showing it earned €404 million ($524.3 million) last year, reversing a loss of €984 million in 2003. Operating result was €383 million compared to €36 million in the prior year. Commenting on the outlook for 2005, "taking into account the integration of Swiss," the company expects an operating result on par with 2004.
CSA Czech Airlines management and pilots union CZ ALPA reached agreement yesterday on a new three-year contract that among other things calls for wage increases of 12.5% in 2005 and 15.5% in both 2006 and 2007 in exchange for increased productivity. As a result of the agreement, CSA expects to move up to No. 7 among AEA member airlines in terms of average number of flown hours. The accord was reached after five months of negotiations. Its technical and legal aspects will be fine-tuned over the following days.
Magic Software Enterprises announced that TAP Servicos Portugueses de Handling has implemented its Hermes cargo handling system in a deal valued at $1.4 million over a four-year period.
Finnair President and CEO Keijo Suila announced his retirement effective at the end of 2005. A search for a successor has begun. Suila has been with the carrier since 1998. Separately, the Assn. of Support Service Industries representing Finnair and the Assn. of Finnish Flight Attendants reached an agreement on the attendants' terms of employment. Thus a strike scheduled to start on Easter Saturday has been avoided and the carrier's flights will continue to operate normally.
Delta Air Lines CEO Gerald Grinstein yesterday said the company is prepared to take whatever steps are necessary to avoid a Chapter 11 filing, but cautioned that it will "constantly bump up against" liquidity issues in 2005 and 2006 and must find more ways to cut costs.
Virgin Blue , Australia's largest low-cost operator, warned that it faces a further significant decline in net earnings of A$89.2 million ($70 million) for the next financial year if fuel prices remain at current levels. Acting Chairman David Ryan announced that the airline is considering "a range of initiatives" to address the impact of extra costs imposed by the fuel price hike, including introduction of an additional ticket surcharge. Fuel prices have risen 28% in recent months and the carrier has no hedging in place beyond March 31.
ARINC's MUSE Link network service was selected by China Eastern Airlines to connect the carrier's host computer system in Shanghai with its passenger operations at a dozen international airports. According to ARINC, the airline expects to save as much as 15 million yuan ($1.9 million) in operating costs each year by leveraging its existing infrastructure in combination with the AviNet MUSE Link connection.
Sabre Airline Solutions announced that Aeroflot has migrated to the SabreSonic new-generation reservations and passenger management solution along with a customized version of the Sabre distribution system for Aeroflot affiliated travel agents.
Air New Zealand reached agreement with Boeing to install the Boeing Electronic Flight Bag on its 777s and 787s. ANZ will have an EFB system installed, certified and delivered on the eight 777-200ERs it has on order, and also will receive EFBs on the two 787s it has ordered.
The Latin American Airline Assn., supported by IATA, called on the US government to end efforts by the Internal Revenue Service to impose US federal withholding requirements and related taxes on Latin American carriers and their non-US-based crewmembers. AITAL also warned that there could be retaliation by affected Latin American countries against US airlines if the tax probe is not halted immediately.
First new IL-76 freighter designed to meet ICAO noise and emissions standards will begin flight testing in June before entering service with Volga-Dnepr Group in September, the company announced. Designated the IL-76TD-90VD, the aircraft is fitted with Perm PS-90A-76 engines at a cost of $4.3 million each. It is being built at Tashkent's TAPO aircraft plant under a joint program involving Volga-Dnepr, Ilyushin Aviation Corp., Perm and TAPO.
El Al unveiled new upgrades to its inflight services that will be available on all flights between the US and Israel. The airline has equipped all of its 747-400s and 777s with a new video-on-demand service in all classes. In addition, it has reached an agreement with Connexion by Boeing to install high-speed Internet service on its 747-400s and 777s. Installation will begin in June and be completed at the end of next year at an estimated cost of $3 million.
Singapore Aircraft Leasing Enterprise inked a deal to purchase up to 40 737NGs from Boeing, comprising 20 firm orders and 20 purchase rights. Deliveries are scheduled to begin in the fourth quarter of next year and continue through 2009. SALE said it has specified the 737-800 as the baseline aircraft for the order but under terms of the deal can convert options and purchase rights to the 737-700 or the proposed 737-900X. All aircraft will be powered by CFM56-7B engines.
United Airlines mechanics , represented by the Aircraft Mechanics Fraternal Assn., yesterday ripped UAL Corp. after the union learned that CEO Glenn Tilton received a $366,393 bonus for 2004 under the company's Success Sharing program ( ATWOnline , March 18). "Our pay, benefit and pension cuts helped to fund the exorbitant Success Sharing bonuses for Tilton and his team," AMFA head Joesph Prisco said. "We do not understand Tilton's view of 'Success.' Neither do we get his concept of 'Sharing.'"
The supervisory board of Deutsche Lufthansa AG and the board of directors of Swiss International Air Lines AG, as expected, yesterday approved Lufthansa's purchase of Swiss, which already had received the green light from Swiss shareholders representing more than 80% of the company's share capital ( ATWOnline , March 21). According to a joint statement, Swiss is to remain "a mostly independent airline with its management and seat in Switzerland, its own fleet and crew, managed within the Lufthansa system as a profit center."
European Commission VP in Charge of Transport Policy Jacques Barrot yesterday appeared to welcome the news that Lufthansa will acquire Swiss. Speaking to media in Washington through a translator, Barrot said, "We are convinced that alliances of companies allow for better quality of service, better effectiveness, and I don't see a risk of monopoly, which is why this coming together of Lufthansa and Swiss is a positive thing."
AirTran CEO Joe Leonard blasted legacy carriers that are benefiting under the financial protection of bankruptcy, which he believes is used as part of their business plans. Despite their financial woes, Leonard said, these carriers are not changing their business models or coming up with a workable plan. "They can duck years of credit obligations and live to fly another day," he commented yesterday in a speech to the Aero Club of Washington. "There's no talk of making money. Those carriers are getting by on handouts and riding the back of the taxpayers of the nation."
Several European airlines yesterday announced new increases in their fuel surcharges. British Airways will raise its surcharge to £16 ($30.37) from £10 on long-haul flights and to £6 from £4 on short-haul flights from March 28. "Our fuel bill next year is expected to be an extra £300 million. With prices continuing to rise, a surcharge increase is regrettably unavoidable," Commercial Director Martin George said in a statement. Virgin Atlantic is adding £6 to its fuel surcharge to bring it to £16.
EasyJet said it expects operating margins for the fiscal first half ending March 31 to be broadly in line with last year's in spite of high and volatile fuel prices and revenue per passenger to be higher than in the year-ago period. "Trading conditions have remained stable in the first half, with total revenue per passenger expected to increase by between 1% and 2% over the same period last year helped by Easter falling into the period," CEO Ray Webster said in a statement on trading prior to entering the closed period ahead of 2005 interim results, which will be announced May 24.
IATA named FAA Assistant Administrator for International Aviation Douglas Lavin to lead its Washington activities from May 1, replacing Regional Director-North America David O'Connor, who will leave that month. "Decisions in Washington impact the entire industry. I am confident that Doug will significantly raise the profile of international aviation among Washington's decision-makers," said DG and CEO Giovanni Bisignani. Prior to joining FAA, Lavin was VP-portfolio management for American Express.
European Commission and the relevant regulatory authorities in the US cleared the proposed joint takeover bid for Amadeus by current airline shareholders Air France, Iberia and Lufthansa and Amadelux, which was formed by two venture capital funds, BC Partners and Cinven. Amadeus is owned 23% by AF, 18% by Iberia and 5% by Lufthansa. The airlines and private equity funds have formed a takeover vehicle, WAM Acquisition, to bid for the whole of Amadeus, which they valued at around €4.3 billion ($5.67 billion).
SN Brussels Airlines' net profit rose 66.7% to €1 million ($1.3 million) in 2004 from €0.6 million in 2003. The company had forecast a €2.5 million profit for the year. "Given the dramatic increase in fuel prices and the highly competitive market environment, these results are encouraging," CEO Peter Davies said. "Although this is slightly below budget, we have created now a solid base for the further development of SN Brussels Airlines commercially, financially as well as operationally." Revenue for the year increased 12.2% to €656 million.
