By pressing on with its mix of broad-based traffic offensives, innovative marketing campaigns and unswerving cost management, the Austrian Airlines Group today published results for the first quarter of 2004 that are the envy of the aviation industry. The company produced a striking improvement in passenger volume of 10.8 %, a huge rise in revenue passenger kilometers of 19 % and a clear increase in load factor on scheduled services to 70.6 % to improve its overall result for the first three months of the year in line with earlier forecasts.
Compared to the first quarter of the previous year, the company succeeded in improving its adjusted EBIT by EUR 23.1m to EUR -27.8m (the EBIT rose by EUR 6.9m to EUR -40.8m). The adjusted profit before tax was EUR -34.9m, compared to EUR -58.3m for the comparison period the previous yearÊ (profit before tax was up from -53.3m in 2003 to EUR -47.6m this year).
In his analysis of the results, the Group’s Chief Executive Officer, Vagn Soerensen, noted: “We continue to implement our strategy of compensating for declining yields by increasing load factors and driving costs down further. According to the trend emerging in our traffic and results, we are well on course to achieve this objective. With the necessary structural optimisations of the past twelve months now behind us, we are now free to devote our full attention to the current expansionary offensive - the Focus East programme - which has been designed to extend our market leadership in services from and to Central and Eastern Europe, and to build up our network in the Asia/Pacific region. Motivation is high throughout the company, and our offensive is already beginning to bring real results. The Austrian Airlines Group is now firing on all cylinders, and beginning to pull away from the competition!”Ê
Improvement in result
Compared to the figure for the comparable period the previous year, the result for the first quarter improved markedly. The EBIT rose by EUR 6.9m to EUR -40.8m, while the adjusted EBIT improved more strongly still, rising by EUR 23.1m to EUR -27.8m. Profit before tax reached EUR -47.6m, following a figure of EUR -53.3m the previous year (adjusted: EUR -34.9m, compared to EUR -58.3m last year). It was possible to compensate for declining yields by increasing load factors and reducing costs. For the year as a whole, the company is working on the assumption that yields will fall by an average of 6 % when all traffic segments are taken into account. The fact that the highly seasonal nature of aviation tends to produce generally negative results throughout the industry in the first quarter of the year does need to be taken into consideration.Ê
Increase in revenue
Although stronger levels of demand meant that flight revenue in the first quarter rose by EUR 24.3m, reaching EUR 440.9m, other revenue fell due to losses incurred from the reporting date valuation of liabilities held in foreign currency. As a result, the operating revenue of the Austrian Airlines Group fell by EUR 44.8m (-8.8 %) to EUR 464.7m.
Ê Significant reduction in expenditure
Operating expenditure in the first quarter of 2004 reached EUR 505.5m, which translates into a reduction of 9.3 % or EUR 51.7m. This fall is essentially the result of reversals of impairment losses according to IAS 36 (Impairment) for aircraft awaiting sale, which totalled EUR 13.1m, compared to depreciation of EUR -42.1m for the first quarter of 2003.ÊÊ
Increase in cash flows from operating activities
In the first quarter of last year, which was strongly influenced by the war in Iraq, the company’s cash requirement increased sharply. Due to the greater inflow of funds from working capital compared to the first quarter of 2003, cash flows from operating activities in the report period rose by EUR 14.3m, from EUR 46.7m last year to EUR 61.0m in 2004. Due to the greater investment volume, stocks of cash on hand and at bank fell. It is important to note that the Austrian Airlines Group made almost 50 % of its prospective investments for 2004 already in the first quarter of the year.
Chief Financial Officer, Thomas Kleibl, provided his own expert perspective on the year: “Company production measured in seat kilometers increased by 5.7 %, while our adjusted operating expenses remained approximately the same. As a result, unit costs fell by 4.8 % compared to the first quarter of last year, only half of which is due to the expansion in our long haul services. Looking at our objective for the year as a whole, the results trend would appear to suggest we are on course to achieve our target of an adjusted EBIT (the figure before one-off effects including gains from exchange rate fluctuations, unplanned depreciations, etc.) of EUR 50m. As we continue to reorganise the Group in the coming months and years, we intend to achieve our overall objective by focusing on our niche strategy and tight cost management, while still pursuing a dynamic expansion in levels of production.”