· Adjusted EBIT of EUR 86 million, jet fuel price negatively impacts earnings
· However, substantial passenger growth of eight percent or 805,000 travelers
· Outlook: Positive earnings expected in the entire year 2018 but slightly below the previous year
Austrian Airlines, Austria’s flag carrier, can look back at an economically successful summer season. Adjusted earnings before interest and taxes (adjusted EBIT) totaled EUR 86 million, while EBIT was at EUR 92 million. The earnings decline of 14.0 percent compared to the first three quarters of 2017 is mainly attributable to two factors i.e. the significant rise in prices for jet fuel and higher expenses for flight irregularities. In contrast, the fleet expansion and service measures had a positive effect, with passenger volume up eight percent to 10.6 million.
“We enjoyed a good boost in earnings in the summer quarter despite increased jet fuel costs and airspace restrictions”, says Austrian Airlines CFO Wolfgang Jani.
In line with the application of rules contained in IFRS 15*, revenue mathematically declined by eight percent to EUR 1,665 million in the first three quarters 2018, and total operating revenue fell by nine percent to EUR 1,729 million. However, adjusted for this effect, revenue was actually up by five percent and total revenue climbed by three percent. Operating expenditures were down nine percent to EUR 1,643 million but rose four percent when adjusted for the effect of IFRS 15. Fuel costs of EUR 331 million, up 13.0 percent or EUR 38 million year-on-year, were the biggest cost drivers (refer to the enclosed chart for details).
Adjusted EBIT, which, for example, deducts book gains from aircraft sales, amounted to EUR 86 million, comprising a drop of 14.0 percent or EUR 14 million from the comparable figure of EUR 100 million in the previous year. EBIT totaled EUR 92 million, down from EUR 106 million in the prior-year period.
Passenger record is close at hand
Austrian Airlines succeeded in considerably increasing its traffic volume. The airline transported 10.6 million passengers in the first nine months of 2018, comprising a rise of eight percent or about 805,000 more than in the first three quarters of 2017. The flight offering measured in available seat kilometers (ASK) was increased by five percent to 21.2 billion. Capacity utilization (passenger load factor) rose by 2.2 percentage points to 79.6 percent. Austrian Airlines expects the entire year 2018 will mark a new record passenger volume, surpassing the threshold of thirteen million.
Since the beginning of the year, Austrian Airlines has carried out 113,968 flights using 85 aircraft in operation, or an average of around 400 flights each day. The regularity of operation was 97.8 percent, whereas the punctuality on departure equaled 77.8 percent. The year-on-year deterioration in performance is mainly due to the unfavorable weather conditions and slot allocation as well as flight cancellations relating to works meetings held in the first quarter.
Austrian Airlines restructures its route network and increases North American frequencies
As previously announced, Austrian Airlines realigned its route network effective at the end of October 2018. Unprofitable routes such as Hong Kong, Havana, Colombo, Isfahan, Shiraz and Linz were eliminated from the airline’s flight offering. In contrast, capacities to Chicago, New York, Montreal, Peking and Shanghai were increased. Moreover, Austrian Airlines began to operate flights to Cape Town in South Africa as of October 27, 2018. It is planned to increase the number of flights to Japan and Canada next year in cooperation with the joint venture partners ANA (Tokyo-Haneda) and Air Canada (Toronto).
“We want to improve our offering for business travelers and strengthen the position of the Vienna flight hub”, states Austrian Airlines CEO Alexis von Hoensbroech. “The more stable partners fly into Vienna Airport, the better it is for the site and ultimately for us as the hub carrier”, he adds.
The total staff of the Austrian Airlines Group amounted to 7,104 employees as at the balance sheet date of September 30, 2018 (September 30, 2017: 6,749 employees). This rise of 355 employees (up five percent year-on-year) mainly related to hiring additional cockpit and cabin crew.
Outlook: Austrian Airlines confirms earnings forecast despite rising jet fuel prices
Austrian Airlines expects clearly positive earnings on an adjusted EBIT basis for the entire year 2018, but slightly below the prior-year level. However, several clouds can be seen on the horizon with respect to the longer-term outlook. “The year 2019 will be very challenging. On the one hand, increasing aviation fuel prices are putting pressure on costs. On the other hand, the competitive situation in Vienna will intensify considerably due to the announced growth of several low-cost carriers”, Austrian Airlines CEO von Hoensbroech concludes.