Financial results for the first half of 2019: Earnings Still in the Red Before the Strong Summer Months

Finance Results

• Q2 profit of EUR 46 million insufficient to offset Q1 loss of EUR 99 million
• Adjusted EBIT down to minus EUR 53 million in the first half-year
• 2019 remains a challenging year: glut of budget airlines and expensive jet fuel burden earnings

Austrian Airlines reported adjusted earnings before interest and taxes (adjusted EBIT) of EUR 46 million in the second quarter of 2019. However, this performance was not enough to compensate for the loss of EUR 99 million generated in the previous quarter. For this reason, Austria’s flag carrier announced an adjusted EBIT of minus EUR 53 million in the first half of 2019. Investments in the fleet and service had a positive impact, as reflected in the significant rise in passenger volume of six percent to 6.7 million.

“The sharp decline in earnings can be mainly attributed to two factors: the glut of budget airlines in Vienna and higher jet fuel costs”, states Austrian Airlines CFO Wolfgang Jani.

Revenue in the first half of 2019 fell by three percent to EUR 982 million (H1 2018: EUR 1,008 million). Total operating expenditures in the same period were up two percent to EUR 1,073 million (H1 2018: EUR 1,048 million). The main reason for the higher costs were the additional expenses for jet fuel and routine maintenance. Jet fuel costs rose by 17 percent or EUR 34 million whereas technical expenditures were up 47 percent or EUR 27 million. Adjusted EBIT, which deducts book gains from sales of aircraft, amongst other items, totaled minus EUR 53 million (H1 2018: EUR 5 million). EBIT in the first six months of 2019 equaled minus EUR 54 million.

Considering the second quarter by itself, adjusted EBIT totaled EUR 46 million, down 41 percent or EUR 32 million from the previous year (Q2 2018: EUR 78 million). Accordingly, the large first-quarter loss could not be offset.

More flights, more passengers, high capacity utilization
Austrian Airlines significantly expanded its traffic volume. In the first six months of 2019, the airline transported 6.7 million passengers, comprising a year-on-year increase of six percent or about 375,000 more passengers than in the first half of 2018. The intercontinental business developed exceptionally well, with passenger volume up 13.2 percent during the first half-year. The overall flight offering in available seat kilometers (ASK) increased by five percent to 13.6 billion. Capacity utilization (passenger load factor) further improved by 2.3 percentage points to 78.1 percent.

The regularity of operation rose to a gratifying 99.0 percent in the first half of 2019 (H1 2018: 98.1 percent). However, punctuality on departure fell to 76.9 percent. This can be primarily attributed to air traffic control problems at Vienna Airport, which have quadrupled compared to the first half-year 2018. The punctuality rate on arrival equaled 79.9 percent.

Fleet renewal takes shape: six additional jets, turboprop phase-out
Austrian Airlines has carried out 66,419 flights deploying a total of 82 aircraft, or an average of about 364 flights per day, since the beginning of the year. The two aircraft leased from Adria Airways as part of a wet lease agreement are not included. The renewal of the fleet announced in January 2019 is beginning to take shape. In July 2019 Austrian Airlines signed lease agreements for six additional A320 aircraft. The first of these jets will be transferred in August 2019. On balance, ten additional Airbus jets will replace the airline’s 18 Dash 8-400 turboprop airplanes by 2021. Accordingly, Austrian Airlines is expanding its Airbus fleet from 36 to 46 aircraft.

“The expansion of our Airbus fleet will help us in competing with budget airlines. This is because these jets enhance customer comfort. The change in the fleet structure will also positively impact our unit costs because we can offer more seats in fewer aircraft”, says Austrian Airlines CFO Wolfgang Jani.

The total staff of Austrian Airlines amounted to 6,999 employees at the balance sheet date of June 30, 2019 (June 30, 2018: 7,118 employees). The reduction of 119 employees (minus two percent) is related to productivity gains in connection with the last reform of the collective wage agreement and the fact that fewer pilots are undergoing retraining.

Outlook for the entire year 2019: positive earnings but significantly below the prior year
Austrian Airlines expects an economically challenging year as a consequence of low-cost competition at Vienna Airport and high jet fuel prices. “We continue to anticipate a difficult year in 2019. We will generate positive results, but substantially below the previous year”, Austrian Airlines CFO Wolfgang Jani adds. In 2018 Austrian Airlines had an adjusted EBIT of EUR 83 million.