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Austrian Air loss is little changed on reorganization

Austrian Airlines Group, owner of the country's largest carrier, said its 2006 loss was little changed from a year earlier because of charges for reorganizing the long-haul route network and increased spending on fuel.

The net loss was €129.9 million ($170.4 million), compared with a loss of €129.1 million in 2005, the Vienna-based Austrian Airlines Group said in a statement today. Analysts surveyed by Bloomberg News had expected a loss of €123 million. Sales rose 8.4% to €2.59 billion.

Austrian Airlines raised €367 million in a November share sale to gain financial flexibility, overhaul the fleet and reorganize the long-haul network by eliminating aircraft and scrapping some intercontinental routes. Profitability was also hurt by an increase in kerosene prices, the airline said. „In this challenging environment, it proved impossible to achieve a positive result,” CEO Alfred Oetsch said in the statement.

„Following the successful conclusion of the capital increase, we have taken another important step toward completing our restructuring program and are now in a position to implement key measures more quickly.” The average price of jet fuel in northwest Europe rose about 15% last year, according to Bloomberg data. Austrian Airlines in 2005 stopped buying hedging contracts to protect against oil-price increases, citing the expense, and instead levied ticket surcharges, which were as much as 41% higher last year than in 2005. Higher kerosene prices added €75.7 million to 2006 costs, the company said today.

 

Austrian Airlines, which also includes the Lauda Air and Austrian Arrows brands, last year also reduced the value of its Slovak Airlines division. The company suspended all Slovak Airlines flights out of the unit's Bratislava base on January 30, saying Slovakia's government had failed to take over €6 million of debt as agreed when Austrian Airlines bought the carrier in 2005 and that there was „no perspective” for reorganizing the unit. Austrian Airlines said in November the 2006 loss before interest, taxes and one-time gains or costs would narrow from the 2005 loss of €52 million.

The adjusted Ebit loss was €8.3 million last year, narrower than a €16 million loss estimate by analysts. The 50-year-old airline, which said in July it aims to return to profit in 2007, has sought a niche through expansion to the Middle East, Asia and eastern Europe as its traffic growth has underperformed European peers. The company's 2.1% increase in traffic last year was less than growth of 5.2% posted by the 31-member Association of European Airlines. (Bloomberg)