Airlines 'under the cosh until 2003'

VETERAN airline boss Sir Michael Bishop has warned aviation investors not to expect any relief from the pain in the industry until the summer of next year. Announcing a sharp fall into the red at his privately-owned BMI British Midland, Bishop said: 'Trading in 2002 continues to be extremely challenging and we do not anticipate a recovery until next year.

'Despite the early signs of shoots of growth and some recovery in volume, yields continue to be under pressure and we do not anticipate that this trend will change significantly for the remainder of the year.' He continued: 'I am being pragmatic, not downbeat, but I do not expect to see any real bounce until the summer season of 2003.'

While revenues in 2001 rose 2.4% to £756m, the number of passengers carried by BMI fell by 400,000 to 6.7m, back below the 7m mark broken through by the traditional full-service carrier for the first time in 2000. That compares unfavourably with record passenger levels at European short-haul competitors Ryanair, easyJet and Go.

The carrier, with a fleet of 57 aircraft, calculates that the 11 September terrorist attacks on the US cost the airline £35m in lost revenues - mainly through the significant drop in passengers transferring to BMI from transatlantic flights into Heathrow or from fellow airlines in the Lufthansa-led Star Alliance.

As a result BMI posted operating losses of £12m for the year. It struggled to a £12.4m profit at the pre-tax level only after the gain from the £72m sale of its ground handling business to train and bus group Go Ahead.

Exceptional losses in the year include the cost of laying off 600 staff - nearly one in eight of the workforce - in the weeks after 11 September and the cost of last summer's launch of its transatlantic service out of Manchester to Washington and Chicago.

There have been question marks over the controversially timed launch into a difficult market, but Bishop said he is sticking with the plan. 'Over the last two months we flew nearly 75% full on these services,' he said. 'We said we would go into profit on the services in three years. The last 12 months just means that we have lost a year.'

He said passenger growth this year would come from the bmibaby budget airline launched last month out of East Midlands Airport, which expects to carry 500,000 passengers by the end of the year and 1.5m in 2003.