Virgin Express Holdings PLC Announces Increased Profits for Full Year 2002

LONDON, March 26, 2003 (PRIMEZONE) -- Virgin Express Holdings PLC (Euronext Brussels:VIRE) (OTCBB:VIRGY) Highlights:

- Net profits of EUR 410,000 for the full year, up from EUR 130,000 last year.

- Voted 'Best Short Haul Airline - 2002' by Belgian travel trade.

- Load factors above 80% and on-time performance greater than 90%.

- Operating costs well controlled and now down to EUR 6.14 cents /ASK.

- Priorities for 2003 include raising equity for expansion and starting a second continental hub.

Chairman's Statement:

"I am very pleased to announce a net profit for the year 2002 of EUR 410,000 (EUR 130,000 in 2001). This result has been achieved in spite of the cessation of our Sabena contract (accounting for more than 40% of our revenues in 2001), the start up of a competitor SN Brussels Airlines (SNBA), and significant price discounting from our major airline competitors.

"In my Chairman's report last year I commented that we had successfully refocused our business back to a Brussels hub, significantly improved the quality of our product and had returned the company to profit. Our priorities for 2002 were to fill the 40% gap in our revenues caused by the bankruptcy of Sabena, and continue with our product improvement, whilst expanding our route network to better serve our growing customer base. In spite of an extremely hostile trading environment, all of these objectives have been achieved."

"We now offer 15 major city destinations from Brussels, up from the 8 destinations we offered following our restructuring, and before the bankruptcy of Sabena. New destinations over the last 12 months include Athens, Bordeaux, Lisbon, London City, and Palma de Mallorca. In 2002 and up to the end March 2003, we had co-operated with SNBA on a number of code share routes, particularly to London Heathrow, Copenhagen, Gothenburg, Stockholm, Rome, Barcelona, Madrid and Nice. Virgin Express offers 'value for money' fares whilst SNBA focussed on a full service traditional offering. By mutual agreement we will stop all trading links, as of 30th March 2003. As a result of the sale of the nine SNBA slots in London Heathrow, we terminated our London rotations early, at the end of October 2002. We are very pleased to have announced code share agreements with Malmo Aviation between Brussels and Scandinavia and with VLM Airlines, who previously code shared with SNBA, between Brussels and London City. In addition we have signed a cooperation agreement with BudgetAir to fly a daily rotation between Amsterdam and Rome.

"Our revenues have grown by 7% to EUR 227 million, having carried 2.5 million passengers, with a doubling of own sales. Load factors have been 80.7% for the whole year, with yields of EUR 86 per sector. Competition has been very strong, with excess capacity on all routes and with traditional airlines discounting their fares to well below their costs, in order to fill this excess capacity. This situation cannot continue for long and we are already seeing signs of some full service airlines grounding aircraft to cut capacity. We are very concerned that SNBA has just increased its fleet by three A319s, at a time when it has just announced an operating loss of EUR 100 million for 2002 and aim to deliver a profit for 2003. Additional capacity on routes can only result in further discounting of fares and additional losses.

"We continue to focus on controlling our costs. In 2002 our operating cost per ASK dropped 12% to EUR 6.14 cents/ASK, competitive with easyJet and significantly below all traditional airlines. We benefited from lower fuel costs and a weaker dollar, but suffered from increased insurance costs and airport charges. Expenditure on marketing has increased in line with our expanding route network. Maintaining the lowest possible costs and the highest operational efficiencies are critical to ensuring we can remain profitable whist our industry restructures.

"Over the past year our product offering has continued to improve. Our customers tell us that on time performance is critical to them. Our punctuality record is now outstanding with 90.7% of our flights on time throughout 2002, well ahead of the industry average of 78%. Combining this punctuality record with superb 'value for money' has resulted in growing support from our customer base in Brussels, where we are now the largest schedule carrier. Not only are we the largest carrier but, in November 2002, we were delighted to be voted 'Best Short Haul Airline-2002' by the Belgian travel trade, with Lufthansa coming in second place.

"Although we are pleased to have made progress in the Brussels market, we recognise the limited size of this market. As a result, we have been investigating the potential of setting up a second operating hub in Europe. In July 2002 we announce that we were considering expanding into Germany with a base in Koln-Bonn. Following announcements from Lufthansa and TUI that they were also planning to start up their own 'low-fare' airline, we made the sensible decision to withdraw, accurately predicting a major fares war. Since then, we announced the intention to form a joint venture with the largest French private shipping company, CMA CGM, to bid for part of the assets of the Group Air Lib and start a 'value for money' low fare airline out of Orly/Paris airport. Negotiations are at early stage with the appointed receiver and the other relevant authorities. If the right terms can be finalised with all parties, including staff, the opportunities for a low fare airline serving the very large Paris market, currently starved of 'value for money' fares, are clearly very significant.

"In 2003 we intend to build on the success of 2002. To continue our growth, we are planning to raise EUR 35 million of equity, by way of a placement to Virgin Sky Investments Ltd (VSIL), our 60% shareholder, with claw back for the IDR holders. These funds will be used to repay existing loan obligations. We expect to seek shareholder approval in April 2003 and issue a prospectus, to qualifying IDR holders, in May 2003. In addition, we have agreed in principle with VSIL for a new working capital facility of up to EUR 50 million, available as from the completion of the equity financing.

"Year 2002 has been challenging with all parts of our organisation working very hard to deliver these results. All of us at Virgin Express have built a company of which we are proud and we are determined to continue offering our customers the very best level of service with 'value for money' fares to an expanding list of destinations. Our industry faces a number of major uncertainties, including the potential effects of the Iraq war and terrorism. We expect seasonal losses in the first quarter, with load factors as forecast and yields below last year but in line with many of our competitors, followed by a profitable second quarter.

We are affected by an industry fares war, as the major operators struggle to adjust to their excess capacity. However, our low fare market continues to grow and we are gaining share, as the travelling public will no longer accept high priced fares on short and medium haul journeys. In spite of the uncertainties, we are confident that as long as we keep our costs and our fares low, and continue to offer the best service to our customers, we will prosper," said David Hoarem, Executive Chairman

Results for the Year

For the year 2002, Virgin Express Holdings PLC reported a net profit of EUR 410,000 versus a net profit of EUR 130,000 in 2001. The net result for the three months ended 31st December 2002 was a small loss of EUR 247,000 as compared to a net loss of EUR 1.2 million in the year earlier period.

Net income per IDS and ADS for the quarter and full year are shown in the table below.

               Earnings per IDS and ADS

                    4Q 2001    4Q 2002  Year 2001  Year 2002

 EUR per IDS         (0.24)       0.05       0.03       0.08
 USD per ADS1        (0.07)       0.05       0.01       0.08
 Average Shares   4,907,500  4,907,500  4,907,500  4,907,500

 USD/EUR (Average)
  Exchange Rate        0.896      0.984      0.896      0.946

(1) On May 28, 2002, Post-Effective Amendment No. 1 to Registration Statement Form F-6 became effective, changing the American Depository Receipt to Ordinary Share exchange ratio from 1 ADR = 1/3 Ordinary Share to 1 ADR = 1 Ordinary Share. The above-represented figures for 2002 reflect this adjusted ratio change.


Total revenue increased for the quarter by 22% to EUR 52.9 million, compared to EUR 43.3 million for the fourth quarter of last year. Revenue for the full year increased by 7% at EUR 227.3 million versus EUR 212.1 million in 2001. Despite the downturn in aviation, the Company has succeeded in replacing more than all the Sabena revenue, which represented over 40% of the 2001 revenue. This achievement was a result of the continuous improvement in our services and on time performance, increase use of our flights by corporate travellers, further developments in our distribution, pricing and revenue management strategy and the expansion of our network.


Despite the stagnant world economy, Virgin Express was able to deliver a net profit up 215% on last year's result. This improvement was made by a combination of increased cost vigilance and strict cost control discipline. The system unit costs (cost per ASK) have been decreased by 12% versus last year from 6.96 to 6.14 Euro cents per ASK for the full year.

Besides the items under direct control of the company such as the corporate hedging policy, the downward trend in operating cost has also been aided by the lower average fuel price and the strengthening of the Euro against the US Dollar.

In 2002, the operating expenses were EUR 224.7 million, representing a 6.7% increase versus last year mainly due to the increase of the average sector length of 29%.

Other costs beyond the company's control have been significantly increased by the respective suppliers in response to last year's 11th September dramatic events: en-route navigation charges, security charges, airport fees and passenger liability insurance costs.

With the exception of the historical factual information, the statements made in this press release constitute forward-looking statements under the safe harbour provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations and involve certain assumptions, risks and uncertainties that could cause actual results to differ materially from those included or contemplated by the statements. The company disclaims any obligation to update any forward-looking statements as a result of developments occurring after the issuance of the press release.

               Table of quarterly and full year results

                     Virgin Express Holdings PLC
              Unaudited Results for the Three Months Ended
                      December 31,  2001 and 2002

  (EUR Thousands)       Three  Months Ended     Twelve  Months Ended
                             December  31,            December 31,
                           2001       2002        2001        2002
 Scheduled           38,559        45,893    181,713       203,613

 Charter              2,125         1,183      9,366        11,469

 Other                2,651         5,813     21,043        12,241

 Total Revenue       43,335         52,89    212,122       227,323

 Operating Expenses

 Flight Operations    3,441         3,617     15,998        17,322

 Aircraft Fuel        6,033         6,545     26,235        25,319

 Navigation Fees      3,116         4,435     12,713        17,737

 Maintenance          5,006         5,086     22,641        26,202

 Aircraft Ownership   1,066         9,859     56,074        45,693

 Station Operations   6,214         8,818     35,729        37,479

 Passenger Services   3,202         3,203     11,234        16,653

 Sales & Marketing    3,235         4,371     14,051        19,672

 Depreciation & Amort.  215           550      1,195         1,673

 General &
  Administrative       3,667         4,363     14,704        16,929

 Total Operating
  Expenses            44,789        50,845    210,574       224,678

 Operating Profit /
  (Loss)              -1,453         2,045      1,549         2,645

 Non Operating Income
  / (Loss)             1,128        -2,782       -669        -2,601

 Profit / (Loss) before
  taxation and          -325          -737        880            45

 Tax and Minority
  interests             -869           489       -749           365

 Profit / (Loss) after
  taxation and

 Minority interests   -1,195          -247        130           410

 Operating Data
 Scheduled Services (Euro cents/KM)

 RPKs (000)          457,481       680,118  2,076,928     2,672,136

 ASKs (000)          638,391       849,846  2,542,399     3,310,251

 Load Factor         71.7%         80.0%      81.7%         80.7%

 Revenue per RPK      8.43          6.75       8.75          7.62

 Revenue per ASK      6.04          5.40       7.15          6.15

 Flights Flown        4.89         4,879     20,366        20,264

 Passengers Flown   507,802       579,423  2,422,736     2,377,562

 Charter Services (Euro cents/KM)

 RPKs (000)          25,271        14,344    125,318       166,067

 ASKs (000)           44.42        23,158    196,405       229,219

 Flights Flown          164            94        954           959

 Passengers Flown    12,737         7,893     83,199        94,722

 Block Hours Flown      453           231      2,199         2,388

 Total (Euro cents/KM)

 RPKs (000)          482,752       694,462  2,202,246     2,838,203

 ASKs (000)          682,811       873,004  2,738,804     3,539,470

 Revenue per RPK        8.98          7.62       9.63          8.01

 Revenue per ASK        6.35          6.06       7.75          6.42

 Flights Flown         5,054         4,973      21,32        21,223

 Ave. Flight Length      887         1,178        863         1,112

 Passengers Flown    520,539       587,316  2,506,012     2,472,284

 Block Hours Flown     9,006        10,594     38,139        42,915

 Fuel Gallons (000)    6,431         7,894     26,289        31,907

 Operating Cost/ASK (1) 6.06          5.68       6.96          6.14

 Ave. Fuel Price (US cents
  per gallon           83.30         83.31      87.42         75.99

 Ave Exchange Rate      0.896         0.984      0.896         0.946

 Ending Exchange rate   0.881         1.049      0.881         1.049


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