Market leadership from and to Central/Eastern Europe and expansion in Asia produce 13.6 % traffic growth/improvement in EBIT/fuel prices become critical success factorÊ
The steady progress in the Austrian Airlines Group’s strategy of expansion into Central and Eastern Europe (the ‘Focus East’ programme) and into the Asia/Pacific region, ably supported by far-reaching marketing offensives, generated passenger volume growth of 13.6 % in the first nine months of the year and a three percent increase in the average passenger load factor on scheduled services to 73.2 %.Ê
Compared to the previous year, the company significantly increased its EBIT, from EUR -7.5m to 39.7m. The EBIT adjusted improved by EUR 48.5m to hit EUR 25.1m. Profit before tax rose from ÊÊÊÊEUR -19.0m in the first nine months of 2003 to EUR 36.0m this year (adjusted: up from EUR -37.4 last year to EUR 10.2m).ÊÊ
In his summary of the third quarterly report for 2004, Chief Executive Officer of the Board of Management Vagn Soerensen made the following statement: “We are underlining our leadership of the market for services into and out of Central and Eastern Europe in the 2004/05 winter schedule, with 99 additional weekly frequencies to a total of 39 destinations in the region. On routes into Asia and Australia, our increased long haul route network has already transformed us into the fourth-largest European provider. We have been able to minimise the fall in yields with dynamic increases in our load factors and reductions in costs, while building up our market share both in our traditional network segment and in the low-cost market (Redticket - return flight included).ÊÊ
“The exorbitant rise in the price of kerosene has become an increasingly important factor in our success in the course of 2004. Today, we find ourselves confronted by fuel prices more than twice as high as the average for the year overall (having jumped from EUR 240 to around EUR 540 per ton at the time of going to press). Due to limited market acceptance, however, we are only able to pass on part of this increase in the cost of crude oil to our customers in the form of charges.ÊÊ
“Since the airline industry tends to be confronted by external factors almost every year, we shall continue to take consistent countermeasures. We will not allow ourselves to be put off course, and shall transform Vienna into one of the most efficient traffic hubs in Europe. Our motivation, vigour and conspicuous offensive pressure give us a sound basis for a successful future!”Ê
Strong improvement in resultÊ
The result increased sharply in the report period. The EBIT rose from EUR -7.5m in the comparable period the previous year to EUR 39.7m. The adjusted EBIT improved by EUR 48.5m to reach EUR 25.1m. Profit before tax reached a figure of EUR 36.0m, compared to EUR -19.0m last year (adjusted: EUR 10.2m, compared to EUR -37.4m).ÊÊ
Revenue continues to increaseÊ
Against the background of stimulated demand, flight revenue rose by 13.1 % in the first nine months of the year, from EUR 1,404.4m to EUR 1,587.8m.
Other revenue fell due to losses incurred due to the reporting date valuation of liabilities held in foreign currency. The operating revenue of the Austrian Airlines Group rose by 7.8 % to reach EUR 1,756.2m.
Expenses rise due to high fuel costs
Operating expenses in the reporting period reached a level of EUR 1,716.5m, an increase of 4.9 % compared to the same period the previous year. This rise has primarily been driven by the sharply increased kerosene prices in the third quarter. The total increase for the first nine months of the year was EUR 52.1m or 31.7 %, while production rose by 17.7 %. When adjusted to account for reversals of impairment losses according to IAS 36 (Impairment) amounting to EUR 17.7m, operating expenditure for the first nine months of 2004 rose at the lower rate of 10.7 %, despite the fact that available seat kilometers increased by 17.7 %. Unit costs fell by 6.0 % compared to the previous year (full year 2003: -5.1 %, full year 2002: -4.3 %). Other disposal costs of aircraft resulted from expenditure on technical modifications necessary for the orderly disposal of aircraft in accordance with agreed contractual conditions.
Cash flows from operating activities fall slightly
Cash flows from operating activities fell slightly in the reporting period, from EUR 211.4m the previous year to EUR 181.2m. Cash flows from investment activities rose to EUR -143.0m (previous year’s figure: EUR -52.4m). Due to a transfer of securities according to IAS 7.7 from current assets into non-current assets, stocks of cash and cash equivalents fell.ÊÊ
Chief Financial Officer Thomas Kleibl stated that, “The dynamic rates of growth in our specialist traffic segments of Central and Eastern Europe and Asia are a solid basis from which to reduce unit costs further. Despite the unusually high fuel prices, and in light of our target for the year, the reach of an adjusted EBIT of EUR 50m (taking into account exceptionals such as exchange rate gains, unplanned depreciations, etc.) is still possible. However, to achieve this objective against such extreme fuel prices will require not only a massive effort on the part of all at the company but also reasonably buoyant levels of demand in the fourth quarter.”Ê