Virgin Express Announces Passenger Growth

Highlights :
Number of scheduled passengers grew by 9%, with load factors up to 80.6%.?
Destinations expanded to 18 major cities.
? Revenue per available seat kilometre down by 21% due to excess market capacity.?
Operating cost reduced by a further 9% to 6.42 EUR cents per available seat kilometre.
?  Seasonal net loss of EUR 11.7 million.
Chairman’s Statement:
During the first quarter of 2003 we have made significant progress by growing our customer
base, our load factors and our share of major routes, all at a time when the industry is suffering
from low demand and excess capacity. We have been able to do this by continuing to offer our
customers high quality “value for money” fares, combined with a tight control on costs. In line
with my announcement of 26th March our seasonal losses for the first quarter were EUR 11.7
million versus EUR 6.7 million in the previous year. Global concerns about war and terrorism,
together with Easter falling outside the Q1, have both contributed significantly to the greater
quarterly loss this year as did the code share agreement with SN Brussels Airlines on a number
of key routes. This code share agreement has now been terminated.
Our scheduled passenger numbers grew by 9% with load factors increasing to 80.6%. We now
serve 18 destinations in Europe including new routes to Bordeaux and Palma de Mallorca and
our on-time performance has been maintained at over 90% for the last eighteen months. This
growth was achieved in a challenging trading environment in which the major operators have
been discounting their ticket prices in order to stimulate the market and fill their excess capacity.
The situation in the Brussels market has not been helped by SNBA adding 20% to their capacity
by leasing in three A319 aircraft. Because of the over-capacity, and in spite of the growth in our
passenger numbers, our revenue fell by 8%, with average revenue per ASK falling by 21%. We
do not believe this situation can continue for long as our competitors are pricing well below their
We continue to keep our costs well under control. Fuel costs have risen in dollars, but this rise
has been mitigated by a weak dollar, which has also helped reduce the aircraft lease and
maintenance costs. Although production has increased by 17%, costs have risen by only 2%.
Costs per ASK have been reduced by a further 9% to 6.42 EUR cents.
On 16th May we announced that we were returning our Paris/Orly slots to the COHOR. Our
allocation of slots would not allow us to build a scale operation to profitable destinations.
Without a low cost base we would have been unable to offer the low fares the Paris market
deserves. We will now re-focus our management attention on building our leadership position in
Our 2nd quarter has started well, although yields continue to be lower than originally planned as
a result of continued price discounting in the market place. It is therefore difficult to project the
outcome for the full year, as this will depend significantly upon the discounting policies of our
competitors. However, we do not expect this situation to last long, because our major
competitors are suffering huge losses and have poor cost positions. There can be no doubt
that, before very long, unprofitable capacity will be forced out of the market.
In order to strengthen our balance sheet, we announced in February 2003 that we were
planning to raise EUR 35 million of new equity via a placement to Virgin Sky Investments Ltd,
our major shareholder, with a claw back to IDR shareholders. This was agreed at an EGM held
on 28th April 2003 and a prospectus will be distributed in June 2003. In addition, a new working
capital facility of up to EUR 50 million will be put in place. With this new funding and the full
support of our major shareholder, we have the financial strength to see us through the inevitable
restructuring of the industry. We are confident that as long as we keep our costs and our fares
low, and as long as we continue to offer the best service to our customers, then our airline will
David Hoare -
Executive Chairman