airberlin increases third quarter profit

  • airberlin shows improved operating result of more than EUR 100 million; net income more than doubles
  • Higher revenue, increased capacity utilization, improved yield and successful partnerships
  • External cost increases partially offset by efficiency-improvement program
  • Etihad Airways relationship contributes approximately EUR 50 million revenues in the year to date and significant cost savings; airlines continue to investigate new opportunities
  • Turbine 2013: Strategic reorientation and concentration on core competence necessary for sustainably improving income in the coming year

2012-11-15 — / — airberlin, Germany’s second-largest airline company, significantly improved its net income for the traditionally strong third quarter, in comparison with the previous year. At the same time, it was able to offset strongly increasing external cost through the successful efficiency-improvement program “Shape & Size”, which will lead to an improvement of EUR 230 million in operations this year.

On the occasion of the presentation of the quarterly report, airberlin’s Chief Executive Officer, Hartmut Mehdorn, said: “We have improved our result. We were able to increase revenue, improve capacity utilization and yield, and we were able to reduce cost significantly. The journey is not complete, however we are on the right track. Our target to return to profitability in the coming year remains unchanged.”

In the third quarter, airberlin was able to increase its net income to EUR 66.6 million (2011: EUR 30.2 million), an increase of more than 120 percent over the corresponding quarter of the previous year. The operating result improved by 4.5 percent to EUR 101.2 million (EUR 96.8 million). Revenue increased by 1.4 percent over the previous year, to EUR 1,395.1 million (EUR 1,375.5 million), despite a targeted capacity reduction of 5.4 percent. Capacity utilization increased slightly by 0.4 percentage points to 84.54 percent (84.14 percent). Yield (revenue per passenger) improved by 6.0 percent to EUR 121.79 (EUR 114.86). EBITDAR (Earnings before interest, taxes, depreciation, amortization and leasing expenses) increased by 3.8 percent to EUR 279.5 million (EUR 269.3 million). Total equity at the end of the quarter amounted to EUR 186.3 million, which corresponds to an equity ratio of eight percent.

airberlin recorded a continuing reduction of direct operating costs – excluding fuel costs – as a result of the “Shape & Size” program, which yielded a contribution of EUR 70 million in the third quarter. Over this period, fuel costs increased by EUR 35 million.

Further strategic development of the frequent-flyer program
Mehdorn said airberlin was looking at further strategic development of its frequent-flyer program: “We have taken the decision to explore ways of developing our frequent-flyer program topbonus. We have decided to migrate topbonus into a new entity and sell the majority of it. This migration will further enhance the attractiveness for the program and its more than three million members and more than 120 partners.”

Hartmut Mehdorn commented on the strategic logic as follows: “As an independent company focusing on this line of business, and having a clear expansion goal, topbonus will be able to reach its full potential.”

airberlin’s Chief Financial Officer, Ulf Hüttmeyer, commented on the financial aspects of the planned frequent-flyer joint venture, saying: “The transaction will be concluded in the fourth quarter and will contribute to a significant improvement of the earnings and balance sheet ratios for the year 2012.”

Strategic partnership with Etihad Airways
Mehdorn also made reference to the strategic partnership with Etihad Airways entered into just a year ago. “Our relationship with Etihad Airways has brought strong benefits. So far in 2012, it has delivered approximately EUR 50 million in revenues, ahead of our initial estimates, and it is offering a wide range of cost-saving opportunities.

“We are working together on joint fleet programmes, bringing in more efficient aircraft, as well as on combined pilot and staff training,” he said. “These benefits will just grow and grow as our partnership deepens.”

Furthermore, the CEO is confirmed that airberlin’s membership in the airline alliance oneworld® brought considered benefits. The expansion of existing codeshare agreements, in combination with the addition of new codeshare agreements, such as for example those with Air France and KLM, will allow airberlin to continuously gain new guests all over the world.

Turbine 2013 necessary for sustainably improving income
Moreover, Mehdorn stated that the general environment continues to be saddled with high fuel cost, the aviation tax, the burden of the postponement of the opening of the new Berlin airport (BER), a weakening euro, and dim economic prospects: “We have come to the conclusion that we need to implement an additional turn-around program, Turbine 2013. With Turbine 2013 we concentrate fully on our core competences. Only in this manner, will we be able to further improve our operating performance in this negative environment and to sustainably be in the black from next year onwards,” stated Hartmut Mehdorn.

Q3 Results:

Q3 2012 Q3 2011 Variance
Revenue €1,395.1m €1,375.5m +1.4%
EBITDAR €279.5m €269.3m +3.8%
Operating profit €101.2m €96.8m +4.5%
Net profit €66.6m €30.2m +120.5%
Capacity utilization / seat factor 84.54% 84.14% +0.4 points
Yield €121.79 €114.86 +6%
Passengers carried 10,693,441 11,252,325 -5%
Aircraft 158 170 -7,1%
Destinations 170 171 -1