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Published on : Thursday, November 13, 2014
In a difficult market environment, airberlin achieved a positive operating result (EBIT) based on revenues of 1,311.3 million euros in the third quarter of the year – a 2.6 percent decline. EBIT (earnings before interest and taxes) decreased to 74.9 million euros in comparison to the previous quarter. Taking into account existing restructuring costs of 15 million euros, the adjusted EBIT amounts to 90 million euros. Last year airberlin reported 115.6 million euros. The net profit for the third quarter of 2014 amounted to 47.5 million euros. At the end of the quarter airberlin had around 800 million euros of liquidity resources.
In line with the general market environment, airberlin’s yield decreased 4.4 percent to 119.42 euros (previous year: 124.93 euros). The flights offered increased by 0.9 percent and the available seat kilometres (ASK) increased by 0.9 percent. Capacity utilisation of 87.2 percent remained nearly unchanged from the corresponding quarter in the previous year with 87.3 percent. Due to the fall in yield, the revenue per available seat kilometre (RASK) of 7.40 cents was 3.4 percent lower than the corresponding quarter in the previous year of 2013 with 7.66 cents.
The cost reduction initiatives already under way showed positive effects in the third quarter. In an annual comparison, airberlin succeeded in reducing the cost per available seat kilometre (CASK) by 0.9 percent to 5.22 cents (previous year: 5.27 cents), excluding fuel. Including fuel CASK decreased by 1.4 percent to 6.99 cents (previous year: 7.09 cents). Cost reductions were achieved notwithstanding a significant increase in expenditures of 5.8 percent as a result of airport charges, air navigation charges and the air transport tax. Personnel costs increased by 6.4 percent due to wage increases and one-time effects, such as the closure of crew bases.
The number of passengers on codeshare routes with oneworld® partners went up by around five percent to 488,000. The partnership with Etihad Airways continued to enjoy positive development in the third quarter. The number of passengers on codeshare routes increased to a total of 413,000 – a plus of four percent over the first nine months of the year. Additional routes from Berlin, Stuttgart and Vienna will contribute to further growth in the future.
Restructuring program: bottom-line improvement of 400 million euros by 2016
Improvements are derived as follows: ca. 40% through cost savings and efficiency increases, ca. 20% through network restructuring and another 40% from additional income as well as significantly improved market penetration.
In the Europe and tourism markets, airberlin is well positioned as a powerful “value-based airline” offering passengers attractive prices and service. Growth opportunities are anticipated on long-haul routes as a result of a premium “full-service” offering implemented together with its partners Etihad Airways and the oneworld alliance.
During the ongoing course of restructuring measures, a further one-time expenditure in the high double-digit euro millions range is to be expected this year. Following the successfully achieved re-capitalisation, airberlin has the liquidity needed to meet the one-time costs of restructuring.
The key elements of the program are:
1. Route network: With its network restructuring, airberlin has strengthened its core markets and removed unprofitable routes from the network. Main markets are to be served with increased frequencies in order to increase airberlin’s competitive position on these routes. Overall, changes to the route network have led to a reduction in capacity of 5%. airberlin is developing its market leadership in Berlin, Dusseldorf and Palma de Mallorca as well as its strong position in other key destinations in Germany, Austria and Switzerland.
2. Fleet harmonisation: Short and medium haul routes on the European route network will, in the future, be operated by a single narrow-body aircraft. Harmonisation from Boeing 737s to the Airbus A320 family is expected to be completed by the end of 2016. Currently airberlin has a further 10 Airbus A321 aircraft on order, will acquire additional A320 aircraft in the market and take over 14 aircraft from a European airline. In order to realise further fleet synergies, the A330 will continue to be employed for the long-haul routes, the leases for which have been renewed at attractive conditions. In September airberlin reached an agreement with Boeing that existing orders for 18 Boeing 737s and 15 Boeing 787 aircraft could be cancelled. This will reduce airberlin’s future capital expenditure and significantly improve the balance sheet structure.
3. Progress in streamlining operational platforms: airberlin is working to increase the efficiency of its operational platforms (AOCs) with the goal of each platform contributing to earnings. The restructuring of the Swiss airline belair is already underway with viable cost structure similar to NIKI and LGW to be achieved. The collective agreement has also been concluded for the Austrian airline NIKI securing competitive conditions.
4. Staffing adjustments: As one of the first steps airberlin closed five of its 15 crew bases in Dresden, Dortmund, Erfurt, Hannover and Munster/Osnabruck. Employees were given respective offers at other German locations. Since the beginning of the “Turbine” programme 850 positions at airberlin have been made redundant. Notwithstanding, airberlin is unable to avoid the reduction of a further 200 positions in administration and ground staff which will be undertaken in a socially responsible manner. Management is in dialogue on this matter with the relevant employee representatives.
5. Market reach: airberlin is greatly increasing its commercial efficiency. A new revenue management system will be providing faster market reach and increasing sales potential by giving more accurate predictions about certain high-demand routes, potential no-shows or cancellations. The optimised analysis and control of these factors allows more precise pricing, resulting in increased sales. airberlin is also establishing a new distribution strategy to effectively address target groups in all segments. Modern online sales channels and apps are addressing the demands of the modern digital lifestyle and tapping into new customer groups. airberlin will also develop its position as the number-one service provider in the tourism industry and intensify its cooperation directly with passengers and tour operators.
6. Further cooperation: Through cooperation with Alitalia, airberlin will strengthen its position in southern Europe and serve a number of new destinations in Italy in the future enabled, among others, by the move from Milan’s Malpensa to Linate airport resulting in a unique offering from German-speaking Europe (Germany, Austria and Switzerland). Further codeshare flights and closer cooperation with the oneworld partners American Airlines and Iberia are also planned. New flights from Stuttgart and Vienna to Abu Dhabi have been added for the winter season. These will be operated under a marketing flight number from our partner airline Etihad Airways, as will additional flights from Berlin.
The measures that have been initiated will ensure that airberlin remains a competitive airline in Europe, a stronger partner for the tourism industry and a full-service provider with premium products on long-haul routes.