BELGIUM, September 03, 2003 (PRIMEZONE) -- Virgin Express Holdings Plc: (OTCBB:VIRGY)(Euronext Brussels:VIRE)
Costs fall below those of easyJet
Highlights
- Scheduled passengers up by 11% with load factors up to 83.3%.
- Scheduled revenues static with revenues per available seat kilometre down 18%.
- On time performance maintained above 91%.
- Unit operating costs down by 19%.
- Operating profits doubled.
- EUR 35 million equity raised to repay all debts.
Chairman's Statement
We are very pleased to announce a successful 2nd quarter in spite of the well documented market difficulties during the period. Passenger numbers continue to grow with our load factors at 83.3% but with a sacrifice in yields. Scheduled revenues were static. Operating profits have doubled, but only because costs have been very well managed and are now at 5.07 EUR cents per available seat kilometre (ASK).
When I announced our first quarter results in May 2003 I noted that many full service airlines were dramatically reducing their ticket prices in order to fill their excess capacity. This practice continued throughout the 2nd quarter. In order for us to maximise our revenues we have reduced our revenue per ASK by 18%. We are able to do this and show a profit only by continuing to reduce our costs. Costs per ASK are down by 19% to 5.07 EUR cents. We now believe we are the lowest cost airline operating from major airports in Europe, including easyJet, and remain significantly lower than all the full service operators. Our competitors will be unable to price their tickets well below their costs for long. They will soon be forced to rationalise their excess capacity. In the 3rd quarter we are beginning to see yields increasing in the market place.
Our focus on cost has in no way reduced the high level of care and service we provide for our customers. Our on time performance continues to be the best in Europe and we are offering our customers a higher quality of onboard food sales and extra leg room for a small additional charge.
Reducing our costs has been a major focus for management. We have been helped by a 20% strengthening of the Euro against the US Dollar, but suffered from a 29% increase in the dollar price of fuel. Aircraft ownership costs are down by 32% by renegotiating expensive expiring leases to lower levels. We would expect this trend to continue as additional aircraft leases come up for renewal during the first half of 2004. Maintenance costs are down 10% mainly as a result of the strengthening of the Euro. Passenger service costs have been brought down by 36% by substituting higher quality of on-board food and drink for free on board snacks. Navigation fees, imposed by monopoly suppliers rose by an unjustified 16%. We have increased our sales and marketing costs by 6%. This figure understates our actual increases as our internet sales have grown to over 50% without the associated costs of travel agent commissions and call centre expenses.
In June 2003 we successfully completed raising EUR 35 million of equity to repay all of our outstanding loans to Virgin Sky Investments Limited, our major investor. They now own 89% of the equity of Virgin Express. In addition, we are in discussion with VSIL to put in place a EUR 50 million working capital facility. This will give us the financial strength to see us through the inevitable industry restructuring.
Yields in the 3rd quarter started well below the previous year but have recently increased, with current booking for September 26% ahead of last year. The outcome for year-end will depend significantly on the extent of price discounting in the market place. We see signs of yield improvements but as yet no significant reductions in capacity or frequencies.
In spite of the uncertainties of the market, Virgin Express has performed very well, offering superb value for money and high levels of service to our growing customer base. We continue to be concerned by some of our competitors pricing below their costs, but expect that this situation cannot continue. To protect ourselves we have reduced our costs, and now believe we are the lowest cost European operator flying from major airports. We are confident that combining this low cost position with high level of service will result in continued growth in passenger numbers, reinforcing our position as Belgium's number one airline.
David Hoare
Executive Chairman
Results for 2nd Quarter
For the 2nd quarter of 2003 the company reported a profit after tax of EUR 0.12 million versus a profit of EUR 2.85 million in the 2nd quarter of 2002.
For the 1st semester of 2003, the company reports a loss after tax of EUR 11.6 million, compared to a loss after tax of EUR 3.88 million for the first six months of the year 2002.
Net income per IDS and ADS for the quarter are shown in the table below.
Earnings per IDS and ADS
Basic 2Q 2003 2Q 2002 Six Months 2003 Six Months 2002 EUR per IDS E 0.024 E 0.59 E (2.40) E (0.80) USD per ADS $ 0.027 $ 0.54 $ (2.62) $ (0.72) Average Shares 4,842,500 4,842,500 4,907,500 4,842,500 USD/EUR (Average) Exchange Rate 1.105 0.919 1.09 0.898 USD/EUR (Ending) Exchange Rate 1.143 0.998 1.12 0.998
Revenues
Total revenues of the 2nd quarter and the first 6 months decreased respectively by 6% and 7% to EUR 58.2 million and EUR 99.8 million, compared to respectively EUR 61.8 million and EUR 106.9 million a year ago. The decrease in total revenue is mainly due to the decrease in the number of sublease aircraft and in the ad hoc charter activity following the decision to maintain the outstanding level of on time performance of 91% and more.
Despite the persistent economic downturn, scheduled revenue has been successfully maintained by raising the load factor to 83.3% in comparison with last year's 79.2% and by replacing the revenue from the SNBA code-share agreement, which expired on March 2003 and represented around 15% of the 2002 scheduled income.
Expenses
The total operating expenses fell by 9% to EUR 55.2 million for the 2nd quarter and by 4% to EUR 106.7 million for the 1st semester 2003 versus last year.
In 2003, the company continues to improve the process of cost control and succeeded in decreasing its system unit costs by respectively 19% in the 2nd quarter (5.07 EUR cents per ASK) and by 13% in the first six months of the year (5.74 EUR cents per ASK).
A table of quarterly and half year results is attached.
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.
Virgin Express Holdings PLC
Unaudited Results for the Three Months Ended
30 June 2002 and 2003.
Three Months Ended Three Months Ended
(EUR Thousands) 30 June 30 June
2002 2003 change
Revenue
Scheduled 55,774 55,957 0%
Charter 3,76 1,122 -70%
Other 2,309 1,077 -53%
Total Revenue 61,843 58,156 -6%
Operating Expenses
Flight Operations 5,034 4,644 -8%
Aircraft Fuel 6,383 7,344 15%
Navigation Fees 4,771 5,527 16%
Maintenance 7,48 6,706 -10%
Aircraft Ownership 11,961 8,138 -32%
Station Operations 10,129 9,519 -6%
Passenger Services 5,113 3,269 -36%
Sales & Marketing 4,885 5,187 6%
Depreciation & Amort. 368 507 38%
General &
Administrative 4,337 4,429 2%
Total Operating Expenses 60,46 55,27 -9%
Operating Profit / (Loss) 1,383 2,887 109%
Non Operating Income
/ (Loss) 1,522 -2,556 -268%
Profit / (Loss) before Tax
and Minority Interests 2,905 330 -89%
Tax and Minority Interests -54 -213 -298%
Profit / (Loss) after
Taxation and Minority
interests 2,852 117 -96%
Six Months Ended Six Months Ended
(EUR Thousands) 30 June 30 June
2002 2003 change
Revenue
Scheduled 95,941 96,497 1%
Charter 5,923 1,285 -78%
Other 5,068 2,059 -59%
Total Revenue 106,933 99,841 -7%
Operating Expenses
Flight Operations 9,024 8,67 -4%
Aircraft Fuel 11,381 13,504 19%
Navigation Fees 8,018 10,064 26%
Maintenance 12,638 12,608 0%
Aircraft Ownership 24,431 17,569 -28%
Station Operations 18,546 17,897 -3%
Passenger Services 7,877 6,694 -15%
Sales & Marketing 9,763 10,063 3%
Depreciation & Amort. 740 1,14 54%
General &
Administrative 8,365 8,475 1%
Total Operating Expenses 110,785 106,685 -4%
Operating Profit / (Loss) -3,852 -6,845 -78%
Non Operating Income / (Loss) 24 -4,537
Profit / (Loss) before Tax
and Minority Interests -3,828 -11,382 -197%
Tax and Minority Interests -53 -248 -372%
Profit / (Loss) after
Taxation and Minority
interests -3,881 -11,63 -200%
Three Months Ended Three Months Ended
(EUR Thousands) 30 June 30 June
2002 2003 change
Operating Data
Scheduled Services
(Euro cents/KM)
RPKs (000) 686,814 881,146 28%
ASKs (000) 866,998 1,057,448 22%
Load Factor 9.2% 83.3% 5.2%
Revenue per RPK 8.12 6.35 -22%
Revenue per ASK 6.43 5.29 -18%
Flights Flown 4,953 5,368 8%
Passengers Flown 599,561 666,317 11%
Charter Services
(Euro cents/KM)
RPKs (000) 44,496 13,676 -69%
ASKs (000) 66,162 21,299 -68%
Flights Flown 318 129 -59%
Passengers Flown 30,804 10,8 -65%
Block Hours Flown 787 235 -70%
Total (Euro cents/KM)
RPKs (000) 731,31 894,822 22%
ASKs (000) 933,14 1,078,747 16%
Revenue per RPK 8.46 6.50 -23%
Revenue per ASK 6.63 5.39 -19%
Flights Flown 5,271 5,497 4%
Ave. Flight Length 1,158 1,214 5%
Passengers Flown 630,04 677,117 7%
Block Hours Flown 11,177 11,784 5%
Fuel Gallons (000) 8,354 8,739 5%
Operating Cost/ASK (1) 6.28 5.07 -19%
Ave Fuel Price
(US cents per gallon) 73.64 94.63 29%
Ave Exchange Rate $/EUR 0.919 1.105 20%
Ending Exchange rate $/EUR 0.998 1.143 15%
Six Months Ended Six Months Ended
(EUR Thousands) 30 June 30 June
2002 2003 change
Operating Data
Scheduled Services
(Euro cents/KM)
RPKs (000) 1,166,108 1,510,843 30%
ASKs (000) 1,499,346 1,838,979 23%
Load Factor 77.8% 82.2% 5.6%
Revenue per RPK 8.23 6.39 -22%
Revenue per ASK 6.40 5.25 -18%
Flights Flown 9,916 9,97 1%
Passengers Flown 1,103,874 1,217,910 10%
Charter Services
(Euro cents/KM)
RPKs (000) 69,995 17,533 -75%
ASKs (000) 107,902 26,157 -76%
Flights Flown 502 147 -71%
Passengers Flown 47,455 12,571 -74%
Block Hours Flown 1,217 283 -77%
Total (Euro cents/KM)
RPKs (000) 1,236,103 1,528,376 24%
ASKs (000) 1,607,248 1,865,136 16%
Revenue per RPK 8.65 6.53 -24%
Revenue per ASK 6.65 5.35 -20%
Flights Flown 10,418 10,117 -3%
Ave. Flight Length 1,039 1,201 16%
Passengers Flown 1,151,329 1,230,481 7%
Block Hours Flown 19,978 21,708 9%
Fuel Gallons (000) 14,648 15,869 8%
Operating Cost/ASK (1) 6.60 5.74 -13%
Ave Fuel Price (US cents
per gallon) 70.71 93.37 32%
Ave Exchange Rate $/EUR 0.898 1.09 21%
Ending Exchange rate $/EUR 0.935 1.12 19%
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