Air Transport World

Europe.(WORLD AIRLINE REPORT)

AEGEAN AIRLINES

aegeanair.com

The Greek carrier is developing into a major competitor for troubled Olympic, boarding 4.4 million passengers in 2006, an 11% increase on the prior year. Its scheduled network spans 15 domestic and 10 international destinations, while its charter activity offers services to the Greek islands from 25 European airports mainly in France, Italy, Norway, Germany, Switzerland and Spain.

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The privately held airline, which is in its ninth year of operation, now accounts for 22.5% of total passenger throughput at Athens International Airport. It was the first Greek carrier to adopt e-ticketing and e-check-in. It is emphasizing expanding its network to the Balkans as well as further developing routes to Germany and Italy. It has been a regional partner of Lufthansa since November 2005.

AER LINGUS

aerlingus.com

The Irish flag carrier completed its IPO in September, reducing the governments stake to 25.4% and providing net cash of [euro]400 million to fund growth plans. But the enthusiasm of being a publicly listed company was dashed rapidly as archrival Ryanair launched a hostile [euro]1.48 billion ($1.95 billion) takeover bid, having quietly built up a 19% stake. The Irish government, Aer Lingus management and labor all opposed the bid and the LCC withdrew in December after the European Commission initiated an indepth inquiry citing "serious competition concerns" over the proposed merger. Ryanair said in February that it hoped to renew its bid when the probe is completed. The EC is expected to announce its decision on July 4. At press time Ryanair held 25.2% of EI.

The financial year ended Dec. 31 closed on a down note, with a [euro]]69.9 million loss compared to a 2005 profit of [euro]88.9 million. The carrier launched its so-called Program for Continuous Improvement in December aimed at further reducing operating costs and turning its fortunes around. It continued expansion of its short-haul network to 75 routes, up from 64 in 2005.

In June, Aer Lingus Group placed an order for six A330-300Es and six A350 XWBs, with deliveries commencing in 2009 and running though 2014. The carrier also holds the option to purchase a further six A350s for delivery by 2018 as part of an order valued at $2.4 billion at catalog prices.

EI recently took delivery of two new A330s, boosting its current long-haul fleet to nine aircraft. Following the signing of the EU-US open skies agreement, it announced the opening of three new services to the US before year end: San Francisco, Orlando and Washington Dulles. It also is working on launching an online partnership with JetBlue under which the duo will make their combined networks available to customers visiting their respective websites.

As announced last year, Aer Lingus withdrew from the oneworld alliance on April 1.

AEROFLOT

aeroflot.ru

The Russian flag carrier headed into the summer buoyed by soaring profits and, perhaps more surprisingly, committed to playing a key role in European consolidation. At press time it was one of two bidders still in play for most or all of the Italian governments 49.9% stake in Alitalia, its SkyTeam partner. Aeroflot CEO Valery Okulov touted the airlines' "complementary networks" and said SU "understand[s] the industry and its issues and how to effectively implement a recovery strategy. Through our proposed investments in Alitalia's products and services, [we] will make Alitalia an internationally competitive airline, while maintaining job security and service for its customers."

Its ambitions do not end with Alitalia, according to reports from Serbia, where government officials disclosed in May that Aeroflot had made an offer for Jat Airways, which is celebrating its 80th anniversary this year.

Back in Moscow, SU was reporting impressive financial results. A 2006 net profit of RUB7.98 billion ($303.1 million) represented a 32.3% increase over its 2005 earnings. It topped that rate in the first quarter, more than doubling its profit to a reported $69.3 million. The busy year included an order for 22 A350 XWBs--the second-largest for the redesigned aircraft behind Qatar Airways--a commitment to lease 10 new A330-200s and a concerted and apparently successful push to implement e-ticketing throughout Russia.

It also announced the formation of its Aeroflot Cargo subsidiary, which eventually will operate six MD-11s and six IL-96-400-Ts, and endeavored to improve its domestic performance and penetration through the consolidation of smaller affiliated airlines into Aeroflotbranded regionals. Okulov said last fall that SU is looking to double its 14% share of the domestic market by 2010.

AIR BERLIN

airberlin.com

Air Berlin established itself as a significant force in Europe after it acquired Munich-based dba last August and leisure carrier LTU in March, when it also announced its intention to buy 49% of Swiss airline Belair, a wholly owned subsidiary of Hotelplan that operates two 757-200s and one 767-300ER.

The LTU deal might bring a codeshare agreement with Condor, which was in talks with LTU about a possible tie-up, as AB ends its relationship with TUIfly. Insiders speculate Condor might be AB CEO Joachim Hunold's next target to consolidate the German airline landscape further, but TUIfly has vowed it "would not tolerate a possible monopoly" of Air Berlin, Condor and LTU. Condor operates 36 aircraft and flew 7.8 million passengers last year. LTU brings a dense short-haul network to AB, but also a focus on long-haul services to North America, the Caribbean, Africa and Asia. While the dba brand disappeared from the market April 1, LTU will retain its brand and management personnel "in the foreseeable future." The AB-LTU deal is subject to regulatory approval. Between them, AB/dba and LTU carried 22 million passengers last year.

Hunold described 2006 as Air Berlin's "most successful year in business" with a net profit of [euro]50.1 million ($65.9 million), a dramatic reversal from the [euro]115.9 million loss in 2005. Revenue rose 28.6% to [euro]1.57 billion with 60% of flight sales generated through seat-only. Last fall, AB said it intended to buy 60 737-800s and revealed that dba placed an order for 15 737-700s. Overall, AB expects to take delivery of 85 737NGs valued at $5.7 billion from November 2007 through 2014.

AIR FRANCE KLM GROUP

airfrance.com/klm.com/airfranceklm-finance.com

The cheerfulness was apparent during the presentation of the group's results for the financial year ended March 31 that also marked the close of the first three years of the merger between the French and Dutch flag carriers, which according to chairman and CEO Jean-Cyril Spinetta "resulted in significant value creation for both the group and its shareholders."

AF KLM reported consolidated net income after minority interests of [euro]891 million ($1.2 billion), a 2.4% decline on a prior-year profit that was inflated by the sale of its Amadeus stake. Excluding the[euro]419 million net capital gain on Amadeus in FY06, earnings would have risen 80%. Revenue grew 8% to [euro]23.07 billion and operating profit jumped 335% to [euro]1.24 billion. Passenger activity was "dynamic" during the year with traffic up 5% on a 4.4% increase in capacity. The group carried 73.5 million passengers, up 5%. Operating income for the passenger division soared 56% to [euro]1.07 billion and adjusted operating margin gained 0.9 point to 6.3%.

The group, however, is aiming higher, targeting a 7% return on capital in the current financial year and 8.5% by 2009-10. To achieve this, it commenced a second three-year merger phase with a new cost-cutting program, Challenge 10, intended to generate savings of [euro]1.4 billion and bring unit costs down by 3%. The phase also will see a deeper integration of strategic functions and replacement of the strategic committee by an executive committee of eight members, each representing an operational division across both airlines. AF will increase its representation on KLM's supervisory board from four to five of the nine seats while KLM sees an extensive change of its top management, appointing Peter Hartman to succeed Leo M. van Wijk as CEO as of July 5 with Van Wijk continuing to be involved in management as group vice chairman.

In May, AF KLM announced an aircraft commitment worth some $7 billion. The orders, which were expected to be signed at the Paris Air Show, comprise 30 A320 family aircraft, 18 777-300s and the firming of two A380 options, which Spinetta said were "part of an agreement with Airbus relating to compensation for [A380] delivery delays."

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AIR ONE

flyairone.it

The privately held Italian airline continued its growth as passenger numbers rose 11.1% to 6.3 million in 2006 on a network spanning 23 Italian and 13 European destinations. Its share of the domestic market climbed 6 points to 33%. …

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