Chairman’s Statement: I am very pleased to announce a net profit for the year 2001 of EUR 130,000 (EUR 65.2 million net loss in 2000). This result has been achieved in spite of the disruptions caused by the 11th September tragedy and the bankruptcy of Sabena on 7th November 2001. Our performance over last year was in line with the projections made twelve months ago.
In my Chairman’s Report on the financial results for the year ending 31st December 2000, I outlined a three-phase recovery for our business:
Phase 1: “Refocus and restructure our business from a Brussels hub to 8 major European cities”. This phase was completed in the first quarter of 2001 by cutting our capacity from 23 to 13 aircraft, by withdrawing from time based charter business and by closing down our Irish operations and unprofitable routes.
Phase 2: “Improving the quality of our product and delivering profits”. In 2001 we made major progress in this area. Our on-time performance is now consistently above 90% and by the year-end we were the best performing on-time airline in Brussels, Copenhagen, Madrid and Rome and amongst the leaders at other airports. Our on-board customer surveys indicate consistently improving levels of service and very high levels of customer satisfaction. Morale at Virgin Express is high.
Phase 3:“Expansion” - In 2001 and the beginning of 2002, we have made a very good start by expanding our network of destinations from our Brussels hub. We started the year serving eight major European cities (Rome, Nice, Milan, London, Barcelona, Copenhagen, Malaga and Madrid). By the end of 2001 we were flying to thirteen destinations. With the start of the summer programme Virgin Express is now flying to Athens and Lisbon too. We are proud to be delivering a superb “value for money” product to our customers on this expanding network.
As a result of the successful completion of phases 1 and 2 of our restructuring, our results have improved dramatically from the losses in 2000. Our operating result would have been even higher at approximately EUR 10 million were it not for the bankruptcy of Sabena and the consequent sudden ending of our commercial agreement with that company in November 2001. However, since being freed from the constraints of the Sabena contract, we have worked hard to replace the lost income by creating a wider network. The travelling public has responded enthusiastically to this initiative and direct sales have more than doubled.
In my report of last year I expressed concern about the future of Sabena, about the unfair subsidies of taxpayer’s money given to them by the Belgian State and about the excess capacity in the market place, driven by Sabena’s uneconomic pricing. In November 2001 Sabena went into receivership.
Soon thereafter a consortium of Belgian businessmen raised approximately EUR 150 million to re-invest in Sabena’s short haul airline subsidiary and successor DAT (Delta Air Transport, now re-named SN Brussels Airlines). Over a four-month period, from November 2001 to the end of February 2002, we explored the possibility of a merger between SN Brussels Airlines and Virgin Express to create a single Belgian airline flying from Brussels Airport to 40 major cities. After detailed discussions both parties agreed to pursue their independent strategies. Virgin Express has a well-defined and well-understood value for money proposition to a growing number of European cities, for both business and leisure customers. We concluded that mixing the cultures of both businesses would have been detrimental to the interests of the Virgin Express business and its shareholders, customers and staff.
In 2001 we have made substantial progress in transforming the economics of our business. Our organisation has coped extraordinarily well with enormous changes that have been undertaken. We have restructured the business back to a Brussels base. At the same time we have coped with a September 11th crisis and the cessation of our Sabena contract, which accounted for over 40% of our revenue. In the short time since the collapse of Sabena we have emerged significantly stronger. There is now a stable and capable management team and we have excellent staff relations with a workforce dedicated to delivering a “value for money” product into a rapidly expanding European market that is turning towards the low fare concept. This progress has been rewarded by increasing public support leading to current load factors of over 80%. At the same time, the management team continues its policy of keeping costs tightly under control, bringing operating expenses back to a level 40% lower than one year before.
In the year 2002 we intend to build on the successes of 2001. As previously announced we expect seasonal losses in the first quarter of 2002, followed by a profitable 2nd quarter. More and more people are now turning to low fare airlines like Virgin Express, having realised that we represent reliability and excellent value. We will continue to demonstrate that we care for our passengers more than do our competitors, as we believe this to be an important part of the increased popularity of our product. Once we have built our network in Brussels, we will consider expanding our operations by setting up a second European hub.