BRUSSELS, Belgium, Nov. 24, 2003 (PRIMEZONE) -- Virgin Express Holdings Plc (Euronext Brussels:VIRE) (OTCBB:VIRGY):
Highlights
- Scheduled passengers up by 7%
- Load factors held above 85%
- On-time performance of 94%
- Unit operating costs cut by 17% but unit revenues down by 22%
- Profitable quarter despite heavy discounting by competitors
- Voted 'Best Short Haul Airline' flying in and out of Belgium
Chairman's Statement:
"Earlier this month Virgin Express was awarded 'Best Short Haul Airline' for the second consecutive year by the Belgian travel trade. We are proud of this award as we won it against all airlines, including full service operators, flying in and out of Belgium. We have worked hard to provide our customers with a high quality, on time, friendly, value for money service and we are delighted to have been recognised. Our scheduled passenger numbers grew by 7%, further strengthening our number one competitive position on intra-European routes from Brussels. In addition, we have managed our costs well, with unit costs down 17% to EUR 5.0 cents per available seat kilometre, competitive with all low fare operators and a fraction of the full service providers.
"In normal circumstances, with high levels of customer satisfaction, high and growing market share and a highly competitive cost position, I would expect to be reporting record levels of profits to our shareholders, particularly in the 3rd quarter, which is traditionally the strongest quarter of the year. Unfortunately I am only able to report a very modest level of profit for this quarter of EUR 1.7 million, or less than EUR 2.50 per passenger flown. How has this situation arisen and what steps can we take to deliver acceptable results to our shareholders?
"The fundamental problem of the Belgian market is a combination of overcapacity with consequent uneconomic discounting of fares and, we believe, illegal subsidies. As a result yields have come down from the second quarter by EUR 5 per ticket or 6%.
"Three years ago when I became Chairman of Virgin Express, we immediately took steps to cut back our fleet from 22 to 11 aircraft, reducing capacity and improving profitability. Sabena unfortunately took no such steps, and in the aftermath of 11th September, went into inevitable bankruptcy, having lost money in 73 of the previous 75 years.
"Since then SN Brussels Airlines (SNBA) was formed, first in the short haul market, then in the long haul market to Africa, and finally in the spring of 2003 they added three Airbus A319s aircraft to their fleet. As I commented in my Chairman's report in May 2003, adding this extra capacity would not be helpful to anybody as operators discounted prices to fill spare seats.
"Full-service operators in other countries have also been slow to cut their capacities. With the war in Iraq and the SARS problem, all major operators have found themselves with high costs and spare capacity. They have been forced to cut prices to stimulate demand. On a marginal basis, revenue may have been generated, but they are pricing well below their full cost on many routes and therefore loss making on these routes.
"Indeed, on a number of routes out of Brussels, initially to Spain and now to Italy, prices have fallen below even Virgin Express's very low costs. We do not believe this situation can continue for long, assuming of course that carriers are not receiving any illegal state subsidies. Sustainable profits will only be generated when capacity is brought into line with profitable demand.
"Virgin Express is happy to compete against any airline in open competition. Over the past two years we have been concerned by the rapid growth of Ryanair out of their Charleroi base. Ticket prices started low, as expected, but over the past six months appear to have dropped even lower, and now payments are offered to customers, contributing to their airport taxes. This does not look normal or right. We look forward to the EC ruling on the legality of the contract between Ryanair and Charleroi Airport. State subsidies of all forms must stop, whether they are being made to the benefit of full service carriers or low fare operators.
"We currently serve 16 major destinations in Europe from Brussels, and operate flights from Amsterdam to Rome and Milan. On most of these routes we fly our own aircraft, but on three routes, Stockholm, Gothenburg and London City, we code share with regional partners. We have plans to accelerate the development of routes out of Brussels. However, these markets are smaller than our primary routes and will be better suited to smaller regional aircraft, employing greater a number of rotations. In many cases these routes are currently served by only one operator and ticket prices are high. We are in discussions with a number of potential partners interested in working with us to provide a competitive alternative for the consumer.
"In September we announced that the Virgin Group, our major shareholder, had been approached by an investment bank proposing a merger between SNBA and Virgin Express. Talks continue. In the event of any substantive progress, the Virgin Express Board will make an announcement.
"We are proud of the service we offer our customers and believe that as long as we are able to compete on an equal footing with our competitors, we will continue to prosper. However, state subsidies in any form must come to an end."
David Hoare, Executive Chairman
Results for 3rd Quarter
For the 3rd quarter of 2003 the company reported a profit after tax of EUR 1.7 million versus a profit of EUR 4.5 million in the 3rd quarter of 2002.
Net income per IDS and ADS for the quarter are shown in the table below.
Earnings per IDS and ADS Basic 3Q 2003 3Q 2002 EUR per IDS E 0.35 E 0.94 USD per ADS $ 0.39 $ 0.92 Average Shares 4,842,500 4,842,500 USD/EUR (Average) Exchange Rate 1.1248 0.984 USD/EUR (Ending) Exchange Rate 1.1652 0.986
Revenues
Total revenues of the 3rd quarter decreased by 8% to EUR 62.1 million, compared to EUR 67.5 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.
Due the persistent economic downturn, scheduled revenue has decreased by 6%. This decrease is mainly due to the weakening of the yield, which has been partially offset by a passenger increase of 7%.
Expenses
The total operating expenses fell by 5% to EUR 60.2 million for the 3rd quarter of 2003 versus last year.
In 2003, the company continues to improve the process of cost control and has succeeded in decreasing its system unit costs by 17% (5.00 EUR cents per ASK).
A table of quarterly 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 September 2002 and 2003.
Three Months Ended
(EUR Thousands) September 2003
2002 2003 change
Revenue
Scheduled 61,778 58,095 -6%
Charter 4,362 2,109 -52%
Other 1,359 1,863 37%
Total Revenue 67,5 62,067 -8%
Operating Expenses
Flight Operations 4,681 4,627 -1%
Aircraft Fuel 7,392 7,542 2%
Navigation Fees 5,284 5,875 11%
Maintenance 8,478 7,447 -12%
Aircraft Ownership 11,403 9,199 -19%
Station Operations 10,114 11,198 11%
Passenger Services 5,573 4,06 -27%
Sales & Marketing 5,538 5,577 1%
Depreciation & Amort. 383 550 44%
General & Administrative 4,201 4,119 -2%
Total Operating Expenses 63,047 60,194 -5%
Operating Profit / (Loss) 4,452 1,874
Non Operating Income / (Loss) 157 -112
Profit / (Loss) before taxation and 4,609 1,762
Tax and Minority interests -71 -85
Profit / (Loss) after taxation and
Minority interests 4,538 1,677
Operating Data
Scheduled Services (Euro cents/KM)
RPKs (000) 825,91 994,426 20%
ASKs (000) 961,059 1,163,727 21%
Load Factor 85.9% 85.5% -0.6%
Revenue per RPK 7.48 5.84 -22%
Revenue per ASK 6.43 4.99 -22%
Flights Flown 5,469 5,718 5%
Passengers Flown 694,265 740,572 7%
Charter Services (Euro cents/KM)
RPKs (000) 72,061 24,212 -66%
ASKs (000) 89,718 40,077 -55%
Flights Flown 363 224 -38%
Passengers Flown 39,699 16,839 -58%
Block Hours Flown 939 427 -54%
Total (Euro cents/KM)
RPKs (000) 897,971 1,018,638 13%
ASKs (000) 1,050,777 1,203,804 15%
Revenue per RPK 7.52 5.91 -21%
Revenue per ASK 6.42 5.00 -22%
Flights Flown 5,832 5,942 2%
Ave. Flight Length 1,186 1,329 12%
Passengers Flown 733,639 757,411 3%
Block Hours Flown 12,312 12,636 3%
Fuel Gallons (000) 9,365 9,098 -3%
Operating Cost/ASK 6.00 5.00 -17%
Ave Fuel Price (US cents per gallon) 78.06 85.90 10%
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