In the reporting period of the first quarter of 2003, the EBITDAR of EUR 63.0m rose by EUR 22.4m or 55.2 % compared to the figure for the same period the previous year (EUR 40.6m). The EBIT fell by EUR 7.6m (19.0 %) to EUR -47.7m. The profit before tax was EUR -53.3m following EUR -51.5m in the same period last year. Flight revenue fell slightly, by 2.8 % to EUR 416.6m, due to the lower demand and reduced yields. In an interim balance sheet statement, Vagn Soerensen, Chief Executive Officer of the Austrian Airlines Group, said the following: “Regrettably, the first quarter of 2003 was badly affected by the global economic downturn, the crisis in Iraq and the early effects of SARS. Only by taking immediate measures to cut our production and costs were we able to begin bringing the negative effects under control. This programme will be followed on the costs side by further far-reaching cuts, and on the revenue side by a broad series of marketing offensives. Despite the welcome conclusion to the war in Iraq, the continuing negative influence of the other factors means that demand has not yet picked up again.”
Chief Financial Officer Mr. Thomas Kleibl describing the current situation: “The success in 2002 is visibile in our fortified competitiveness and the improvement of our capability to react fast. The currently difficult situation of world-aviation is slowing down our turnaround programme. The persistent direction for success must not be endangered by individual interests!” highlights Kleibl the necessity for a co-ordinated overall effort of the entire Group.
In the first quarter, the result fell in comparison to the previous year. The EBIT fell by EUR 7.6m to EUR -47.7m, while profit before tax was EUR -53.3m following EUR -51.5m in the same period last year. These figures need to be viewed in the proper context of wider seasonal factors, which generally lead to negative results in the aviation industry in the first quarter of the year. This situation worsened in 2003 due to the global uncertainty over continued difficulties in the global economy, the conflict in Iraq and the outbreak of SARS.
Due to the reduced working capital compared to the first quarter of last year, the cash flow from operating activities fell from EUR 76,8m in 2002 by EUR 30,1m to EUR 46,7m. As a result of the Group’s sharply reduced investment volumes, its cash and cash equivalents remained at approximately the same level as that at the end of last year.

Despite an increase in passenger kilometers, flight revenue fell by 2.8 % to EUR 416.6m due to the change in demand and reduced yields. Exchange rate valuations of foreign currency liabilities at the reporting date provided other operating income. As a result, the operating revenue of the Austrian Airlines Group rose by EUR 31.7m (+6.6 %) to EUR 509.5m.

Operating expenses in the first quarter of 2003 reached EUR 557.2m, an increase of 7.6 % or EUR 39.3m on the comparable period for the previous year. The rise is essentially due to provisions amounting to EUR 42.1m for aircraft awaiting sale, made in accordance with IAS 36 (Impairment). When adjusted to account for such effects, expenditure fell by EUR 2.8m (-0.5 %).

Capacity on scheduled services increased in the first quarter of 2003 against the extremely weak comparison period the previous year. Available seat kilometers rose by 13.3 %. Due to the global uncertainty surrounding the Iraq conflict and SARS, however, revenue passenger kilometers - used as a measure of demand - only increased by 11.5 %. The passenger load factor fell to 64.9 % (-1.1P.) as a result. The number of passengers carried fell by 3.3 % to 1,532,941. With total revenues of EUR 371.1m (-5.3 %), the EBIT for the scheduled segment was EUR -40.8m, compared to EUR -36.2m the previous year.
In the charter service segment, production increased compared to the weak preceding year. Available seat kilometers increased by 46.2 %. As levels of demand became progressively weaker, however, revenue passenger kilometers only rose by 32.5 %. Revenue in this segment totalled EUR 45.5m, following EUR 36.6m the previous year. The EBIT fell from EUR -4.1m in the first quarter of 2002 to EUR -7.1m in the same period of 2003.

The complementary services segment (which includes catering, Travel Value Shops, third party handling and aircraft leasing) recorded revenues of EUR 31.4m (-6.3 %) in the first quarter. At EUR 0.2m, the EBIT remained constant compared to the preceding year.

Taken by geographical segment, there were significant falls in scheduled services compared to the previous year, primarily on routes to North America and the Middle East. In the charter area, Tunisia, Morocco and Egypt developed at a stronger rate than last year, but remained below expectations due to the conflict in Iraq.
Strategy to meet demand for low-cost travel a success
In the first quarter, the Austrian Airlines Group successfully introduced the second generation of its offers designed to exploit the growing market for low-cost flights. The Group has used a range of new management tools, allowing it to place its special offer fare offensives in accordance with predicted average load factors on respective routes. Examples include the Group’s new return fares to any destination in Germany for just EUR 110. In an effort to stimulate demand for flights in the coming summer season, moreover, the Austrian Airlines Group has launched a worldwide “Magic Price” offensive, with fares reduced by up to 50 %
The Group’s Chief Commercial Officer, Dr. Josef E. Burger, commented that, “The new system allows us to offer the same fares as our no-frills competitors without undermining our East-West and West-East network transfer concept. We already control market share under both business models, which allows us to offer the customer a significantly greater range of options via all possible sales channels.”
Investment volume in the first quarter was EUR 47.0m, following a figure of EUR 168.4m last year (-72.1 %). Based on fixed long-term purchase agreements, two highly modern and cost-efficient Dash 8-400 aircraft have been newly integrated into the fleet since the beginning of the year.
The Group took a number of important steps in the reporting period as part of its concerted effort to adjust the fleet and business segments to changed market conditions. The sale of two Lear 60 Business Jets means that the ‘Corporate Jet’ business segment can now be closed down in its entirety. The order for a fourth Boeing 777 long-range jet was converted into a contract for three medium-range aircraft of the modern Boeing 737-800 type.
During the Group’s consistent attempts to cut unnecessary capacity and idle cost, three Dash 8 (one of which with a purchasing agreement) and one Boeing 737 aircraft had been leased out as at 31 March.

Due to the current lack of demand, one Airbus 321, one Canadair RJ, one Dash 8-300 and one Dash 8-400 were also put out of service temporarily. Current overcapacity is being reduced wherever possible and will be profitably employed again once markets have recovered.
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