Racaru, Blue Air: Profit margins are slashed by economic crisis

In order to increase the market share, low-cost operators have not raised the ticket prices in the context of surging oil price, therefore the company’s earnings had plunged dramatically.

“Difficult would be the best term to describe the aviation industry in first nine-months in Romania. The surge of oil price combined with current economic crisis will lead to a fall of profit margin”, said managing director of Blue Air, George Racaru (photo).

He added that due to the current international economic crisis, the growth pace of the aviation industry in Romania, forecasted early this year would not be met. “The main concern that stepped the break of airline companies’ engines was the skyrocketing crude oil price. We estimate that in the following three months the prices will settle and the aviation industry will resume its normal growth trend,” Racau added.

Price of crude oil dropped Monday below 64 US dollars/barrel threshold despite the previous decision made by ministers within the Organization of the Petroleum Exporting Countries on cutting production by 1.2 million barrels a day.

While several airline operators or low-cost carriers decided to discharge less profitable routes and expansion plans, amid current economic crisis, Blue Air will remain focused on their plan settled beforehand. “On the winter schedule, November 26, 2008 – March 28, 2009, Blue Air will not cancel any of its destinations” representative of the low-cost carrier added.

Apart from the existent routes, Blue Air is actually launching new ones. On October 28, Blue Air will operate flights between two international destinations, Brussels and London, twice a week, and starting with December 11, the flight frequency will enhance to three weekly flights.

“For London-Brussels route, we estimate a 70% occupancy level. Before implementing the new route we took into consideration the market demand and research on its profitability”, Racaru added.

As of October 28, the low-cost carrier will operate a new route, Arad – Treviso (Venice), Italy and Spain, representing 42% of Blue Air’s revenue.

In first nine months this year, the passenger volume of Blue Air mounted to 700,000, up 70% from similar interval last year.

The ticket prices in this interval increased by 5% on crude oil price surge.

The occupancy level of the company is 83%, down from 85% last year, in the context of transport capacity boos, from 7 aircraft to 8 Boeing 737 aircrafts.

Two more Boeing 737-800 Next Generation aircrafts will replenish the company’s fleet by yearend.

Translated by Camelia Oancea