Air Berlin: Extensive program accomplished
At the Press Conference on the Annual Financial Accounts in Berlin on Monday, Joachim Hunold, Air Berlin´s CEO, declared 2007 the “Year of Growth". He designated the completion of the integration of dba, the Munich-based airline company which was bought last year, the acquisitions of the Düsseldorf-based LTU and the Swiss airline Belair, and the cooperation with the Dortmund-based airline company Walter as “milestones in Air Berlin´s corporate history". Air Berlin put its 100th jet into service, ordered 25 environmentally-friendly “Dreamliners" from Boeing, founded independently operating technology companies in Berlin and Düsseldorf, completed a capital increase and placed a convertible bond, extended the “Top Bonus" program and designed a new intercontinental product. Since 2005, the former charter airline company has almost doubled the number of passengers transported, and has gained ground as a “premium carrier". “We have come a long way," concluded Hunold.
Nevertheless, 2007 was also a year in which the company had to overcome major obstacles. As Ulf Hüttmeyer, Air Berlin´s CFO, explained: Exceptional effects resulted in approximately EUR 70 million in taxes on earnings. This was caused by the delayed start of the integration of LTU, the technical problems encountered with the system integration and capacity monitoring, and the extreme weather-related weakness in demand in April, with the ensuing yield deterioration in the following two months.
Sales revenue up 61 percent
For the 2007 financial year, sales revenue climbed from EUR 1.58 billion to EUR 2.54 billion, i.e. a 61 percent increase. EBITDAR (earnings before interest, taxes, depreciation, amortization and lease expenses) increased by 48 percent, i.e. from EUR 257 million to EUR 379 million. Due to non-recurring expenses, EBIT (operating income before interest and taxes) dropped by 67 percent, i.e. from EUR 64 million to EUR 21 million. Net profit amounted to EUR 21 million. In the ad hoc press release of 12 March 2008, the company had estimated this figure at approximately EUR 11 million.
The difference resulted from the circumstance that Air Berlin had activated a tax asset in 2006 and thus realized latent tax proceeds. In the context of preparing the 2007 Annual Financial Statements, it has now become apparent that this activation, in accordance with IFRS, has to be retroactively adjusted in 2006. As a result, the 2006 tax profit and thus also the net profit after taxes are reduced by EUR 10 million (net profit after taxes of EUR 40.1 million, instead of EUR 50.1 million originally disclosed). Consequently, for 2007, the tax profit and the net profit after taxes increased by the same amount. Net profit for 2007 reached EUR 21 million or EUR 0.33 per share (2006: EUR 0.76 per share). Operating income and pre-tax profit for these two years are not affected by this period shift which has no effect on liquidity.
Cost-efficient Internet sales
The sale of individual seats increased by 3 percentage points to reach 63 percent of sales revenue. Despite strong linear growth, charter business decreased from 40 to 37 percent of sales revenue. Hüttmeyer was especially pleased with the percentage of Internet sales: Currently, cost-efficient Internet sales represent 46 percent of sales revenue. Furthermore, due to the successful integration of LTU´s “Redpoints" program, the Frequent Flyer program, “Top Bonus", now counts 1.3 million members. The number of corporate agreements increased from 330 to 493, i.e. an increase of 49 percent.
Air Berlin was able to reduce the share of direct operating costs by 3.2 percentage points, i.e. from 61.3 to 58.1 percent, by lowering airport charges from 26.2 to 23.5 percent and by lowering the cost of catering from 3.8 to 3.4 percent, among other things. As a share of direct operating costs, fuel cost only increased marginally from 22 to 22.1 percent. Despite rising staff and technology costs and the expenses related to integration, unit cost (CASK) at 3.54 Eurocents (3.50 Eurocents in the previous year) remained practically unchanged. The fleet increased from 88 to 124 aircraft, mainly as a result of the acquisition of LTU and Belair. Equity interest increased from 23 to 28 percent. As at 31 December 2007, the company had liquid funds amounting to EUR 469 million (+105 %).
Potential for improving performance
According to CEO Joachim Hunold, the 2008 optimization program will include eliminating unprofitable flight routes, reducing flight frequencies on routes which are also served by other companies within the Air Berlin Group, consolidating yield management, replacing Fokker 100 aircraft with Q400 turboprops, and reducing the utilization of short-term wet leases. Furthermore, sales will be rendered more efficient through a uniform structure for all the companies within the Air Berlin Group, and strengthened through world-wide ticket sales. The price structures of Air Berlin and LTU will be harmonized, and fee schedules adapted to the competitive level. Moreover, plans exist for aligning the collective agreements within the Group.
For 2008, all things considered, Air Berlin´s Management Board sees a potential for improving operating performance by EUR 100 million. Inflation-triggered and growth-related cost increases could also be offset therewith. The company will have an average of 127 airplanes in service, with the fleet growing moderately to reach 134 airplanes by the end of the year. On average, 74 percent of 2008 fuel costs are hedged.
Press Contact: Peter Hauptvogel Director of Corporate Communications, Air Berlin phone: +49 30 3434 1500 fax: +49 30 3434 1509 e-mail: email@example.com