BUSINESS
JAL to concentrate
on high-profit routes
Airbus counts cost of shorthaul price war with Boeing J
Forgeard claiming the US giant
initiated a price war against the
IRBUS INDUSTRIE has A320 family. "They said: 'Let's kill
made provisions for losses Airbus'. They dumped prices," he
totalling £400 million ($650 mil- says, adding that his predecessor
lion) as a result of the mid-90s price Jean Pierson was forced to react.
war with Boeing over shorthaul
Part of the exceptional charge
airliner sales, the European manu- stems from more recent problems
facturer has revealed.
encountered by Airbus - including
Around £200 million of the the Asian economic crisis, which
charge was absorbed last year, led to Philippines Airlines canresulting in a loss to the consor- celling an A3 2 0 order.
tium's central administration of
Forgeard stresses that if its
£125 million (Flight International partners' profits from Airbus work
3-9March). Afurther £200 million are taken into account, the consorcharge - relating to price cutting in tium returned a profit of around
1995-97 - will be spread over the £450 million last year, while the
next few years, and will lead Airbus GIE would itself have made a profto register another loss this year. it of £30-40 million had it not been
Most of the overall £400 million for the charge.
provision relates to price cuts in die
Airbus also revealed that its partyears after the launch of Boeing's ner companies have approached
Next Generation 73 7 in 1993,with their governments for refundable
Airbus chief executive Noel investment in the A3 XX proCHRIS JASPER/LONDON
A
gramme. Such investment is
allowed up to one-third of the project's $ 10 billion launch costs.
Airbus'
difficulties
are
mirrored at Boeing, says aerospace
analyst Paul Nisbet of JSA
Research, who has put a figure of
$590 million on Boeing's losses due
to commercial aircraft discounting
last year.
Nisbet says Boeing 747s sold for
an average of $129 million (27%
down on list price); 777s for $114
million (17% down); 767s for $67
million (25% down); 757s for $49
million (25% down) and 737s for
$31 million (14% down).
Nisbet was able to calculate the
figures because of Boeing's new
accounting procedure, which
discloses charges for aircraft modifications and parts, revealing the
prices of aircraft built by the original equipment manufacturer.
•
Sibir bounces back with turnover up 10%
PAUL DUFFY/MOSCOW
F
ORMER AEROFLOT earner Sibir is showing signs of
rebounding from the Russian economic collapse, with traffic and
financialfiguresshowing improvement during 1998.
The Novosibirsk-based airline
carried 620,000 passengers last
year, up 3% on 1997, while cargo
volumes were up by 5 %, to 5,800t.
Sibir's success is all the more
impressive when set against the
2 5 % drop in traffic suffered by the
airlines of West Siberia as a whole.
Sibir saw turnover grow by 10%
last year, having posted sales of
$102 million the previous year.
The carrier did not reveal profit
and lossfigures,but claims to have
broken even, according to Russian
accounting procedures, based on a
simple cashflow equation. Load
factors rose to 76%.
By the end of 1998, Sibir had
cleared outstanding debts for staff
salaries and airport charges and had
24
APAN AIRLINES (JAL) ls to
transfer low-profit operations to
its subsidiaries in an effort to cut
costs under a new business plan
running to 2001.
JAL plans to rename Japan Air
Charter and transform it into a
scheduled carrier operating shorthaul flights to mainland Asia,
Hawaii and Oceania, while shifting
minor domestic routes to JAL
Express.
The move parallels an earlier
reorganisation by rival All Nippon
Airways (ANA), which is transferring 20% of domestic routes to
subsidiary Air Nippon over a
three-year period.
JAL itself plans to focus on highly profitable long-haul routes to
Europe and the USA, as well as
core domestic services.
Under the new plan, the airline
will also slash its 36,000-strong
ground workforce by 10%, cut its
board by half, defer the purchase of
12 aircraft and retire others.
JAL hopes the moves will enable
it to report an annual profit of at
least Y30 billion ($250 million). In
the year ended March 1998, it
recorded an after-tax loss of Y94.2
billion on sales of Y1.2 trillion.
Despite the planned changes,
Merrill Lynch analyst Naoko
Matsumoto believes JAL's capacity
expansion plans are too ambitious although not as much of a gamble
as those of ANA.
"With demand projected to
actually fall this year and the outlook for next year projected to be
fairly flat, it is difficult to see how it
can reach its target," he says.
•
Aeroflot and BA sign
co-operation deal
Sibir claims to have broken even in 1998 and cleared outstanding debts
prepaid a one-month fuel bill.
During the year, the airline bought
two Tupolev Tu-154Ms and fitted
new cabins to many of its 26
Tu-154s and Ilyushin Il-86s.
Sibir's turnaround owes much to
new managing director Viacheslav
Filyov, who took over in April
1998. During the first half of that
year Sibir saw traffic fall by 10%,
but, with Filyov on board, that
climbed by 12 % in the second half.
The airline has consolidated its
position in western Siberia
through mergers with local carriers in Tomsk, Barnaul and
Kemerovo, and is negotiating with
others. Sibir also plans international expansion, centred around
increasedflightsto Germany.
•
A
EROFLOT and British Airways have signed an outline
agreement to co-operate. Aeroflot
confirms the agreement, but has
not realeased any further details. It
is believed to outline terms of cooperation for the LondonMoscow route, on which Aeroflot
is facing growing competition
from Transaero. A second UK carrier, British Midland, is also
launching services on the route. •
FLIGHT INTERNATIONAL 24 - 30 March 1999