Austrian Airlines Group have reported strong first quarter results with the companies Chief Executive Officer, Vagn Soerensen, making the following statement:‘In the first quarter of the year, traditionally a weaker period in the industry as a whole, we managed to report far stronger results than in the same period last year and continue building upon our Eastern offensive. We managed to increase availability (measured in ASK or available seat kilometers) by 12.9% and to sell this on the market at a rate significantly higher than the market average. As a result, we increased our load factor on scheduled services by 4.5 percentage points in the off-season to reach 72.4%. Based on this powerful traffic performance, and against the background of the continuing high price of kerosene, we improved our operating result by 18.6% (EBIT adjusted). Now, we have designed a range of important new measures - the launch of our new fare concept and internet offensives, the setting-up of a new traffic flow management system, future product innovations in the form of comfortable lie-flat beds in Austrian Business Class and high-speed internet access on our long-haul flights - to keep us on this successful course. In 2006 we expect to achieve a balanced result (EBIT adjusted). Although this will undoubtedly be a challenge, particularly in the context of the industry-wide uncertainty over the kerosene price trend, it is an entirely feasible objective from a present point of view given our commitment and strength.’

Improvement in operating result
Due to the increase in passenger volume and stronger productivity, the Group improved its adjusted EBIT by 18.6% in the traditionally relatively weak first quarter, from EUR -66.2m to EUR -53.9m, despite the significantly higher fuel costs. The EBIT improved even more strongly, rising from EUR -75.0m in the same period last year to EUR -50.1m in 2006. The loss before taxes fell by EUR 26.8m to EUR -55.6m.

Significant increase in revenue
Due to the stronger demand, flight revenue rose by 19.3% to reach EUR 516.6m. Due in particular to exchange rate valuations at the reporting date, Other revenue rose by 17.9% to EUR 19.1m. Operating revenue in the report period increased to EUR 565.6m (+17.5%).

Increase in cash flow from operating activities
The company generated a strongly positive net cash flow from operating activities in the report period of EUR 48.8m (2005: EUR 23.3m). Net cash flow from investment activities fell from EUR 55.6m to EUR 22.7m.

Chief Financial Officer Thomas Kleibl made the following comment on the financial dynamic of the quarterly balance sheet of the Austrian Airlines Group: ‘The average kerosene price during Q1 2006, which was almost USD 600/ton, was more than USD 100/ton above the comparable figure for the previous year. As a result of this trend, taken together with the expansion in production volume of 8.8% as measured in ATK, our fuel costs increased by EUR 40.2m in the report period to hit EUR 113.8m; this is the equivalent of an increase of 55%. Our increased and effectively-sold level of production, combined with a stringent cost management and restrictive staffing policy, made it possible for us to improve productivity once again.
Operating expenses increased by 10.6% in the first quarter, reaching EUR 615.7m. This rate of growth, which is disproportionately low compared to the increase in income, was primarily driven by Expenses on materials and services, which rose by 21.2% to EUR 349.2m. The main cause of these cost increases were higher fuel prices. Personnel expenditure increased to EUR 128.5m (+7.6%). Other expenses fell by 27.0% to EUR 43.5m, due mainly to strict cost management in the area of overheads and exchange rate valuations at the reporting date.

Traffic growth continues and further market share won
Explaining the positive market performance, Chief Commercial Officer Dr. Josef E. Burger noted that, ‘By increasing our load factor on scheduled services by 4.5 percentage points, we have managed to powerfully increase our traffic performance. As a result, we have been able to win still greater shares of our core markets. Our market strategy will continue to focus on the most dynamic national economies. We are currently well-positioned, with wide availability, in eight of the world’s top ten fastest-growing aviation markets. As we continue to strengthen our product in Eastern Europe, we now operate a total of 571 weekly connections to 44 destinations across this region.’

In scheduled services, availability (measured in available seat kilometers) rose by 12.9% and RPK (revenue passenger kilometers) by 20.3% in the first quarter, the latter an unusually strong rate of increase. As a result, the passenger load factor rose by 4.5 percentage points to reach 72.4%. The number of passengers carried increased by 16.7% to 1,930,976. Revenue produced in the scheduled segment increased by 21.7% to EUR 479.9m (2005: EUR 394.2m). The EBIT improved to EUR -46.0m, compared to EUR -66.1m in the same period last year.

Due to a reduction in the number of flights, the charter segment reported a 9.9% fall in passengers in the first quarter of 2006. The number of flights in the medium-haul segment overall fell slightly compared to last year. Of particular importance here is the growth seen on the routes to and from Ireland and Great Britain, which is primarily influenced by incoming traffic to Tyrol and Salzburg in the winter season. There was also a slight adjustment to the route programme in Spain during the report period. Revenue in the charter segment fell slightly to EUR 36.7m (-5.4%), while the EBIT improved to EUR -4.9m (2005: EUR -9.9m).

Taken by geographical segments, the growing availability saw a disproportionately strong increase in long-haul traffic. The biggest increases in passenger volume were reported in the Far East and Australia geographical segments. There was also increased traffic growth on scheduled services in the short- and medium-haul segments. The strongest growth was seen on our routes to Scandinavia, the Middle East, Central Asia, Central Europe and Switzerland. In the charter segment, availability was reduced on long-haul routes and partially transferred to scheduled services in the form of integrated long-haul planning.
Payments from the acquisition of tangible and intangible assets (investments) reached EUR 50.6m in the first quarter (previous year: EUR 65.0m). As at end-March, one Airbus A319 had been newly integrated into the fleet.

In the course of the strategic fleet adjustment, one CRJ-100 was sold and transferred at the end of March, and one A340-200 taken out of service. This aircraft will be transferred in mid-May 2006. Fixed orders are in place for one B737-800, with delivery due to take place in May 2006, and one B777-200ER, with delivery scheduled for the beginning of 2007. At end-March, due to the consistent reduction in unnecessary capacity and fleet adjustment, one Boeing B737-600, one Dash-8/300 (with purchase agreement) and three Embraer 145 were being leased outside the Austrian Airlines Group. One Boeing B737-300 and one Fokker 100 were in use at subsidiary company Slovak Airlines.
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