Flag carriers struggle against low-cost airlines
Financial Times
By Gordon Smith in London
Published: October 7 2004 12:21 | Last updated: October 7 2004 12:21

Passenger numbers released on Thursday emphasised the continuing struggle that Europe’s national flag carrying airlines face as they compete with low-cost rivals.

Air France-KLM and Scandanavian Airlines said competition was making it difficult to attract passengers, while budget airline EasyJet said it saw a 25 per cent increase in passengers during September to 2.36m as it continued to launch new services.

Passenger numbers on Air France-KLM, Europe’s largest airline, grew 6.9 per cent in September, helped by a 7.5 per cent rise on transatlantic flights. The airline’s load factor - a measure of how many seats are filled - rose 1.5 percentage points to 79.5 per cent.

But the airline, created earlier this year by the merger of the Dutch and French flag carriers, said traffic on its European network grew by only 3.3 per cent and the load factor fell by 0.3 percentage points.

In contrast, EasyJet said its load factor was 86.9 per cent, though it added only 1 percentage point during September. Nevertheless, it repeated the statement it made in September and said it expected pre-tax profits to exceed £60m this year, “at least” 16 per cent higher than 2003.

SAS said European routes continued to be “very weak” after demand in August and September had been worse than expected. Although passenger numbers increased to 3m in September from 2.9m last year, yields - average fare prices - fell 7 per cent in August and could be even worse in September, SAS said.

The airline said the outlook “remains cautious” owing to overcapacity and the competitive situation in Europe.

Higher fuel charges are also eating into airlines’ operating profits. On Thursday, in response to the latest rise in oil prices Lufthansa, the German national airline, said it would pass on the higher costs to passengers and impose a surcharge from October 15.