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31 July 2013
2013 First Half Results
2 2013 First Half Results | 31 July 2013
Disclaimer | Forward looking information
Certain information included in these statements is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward looking statements.
Forward looking statements include, without limitation, projections relating to results of operations and financial conditions and the Company's plans and objectives for future operations, including, without limitation, discussions of the Company's Business Plan programs, expected future revenues, financing plans and expected expenditures and divestments. All forward-looking statements in this report are based upon information known to the Company on the date of this report. Due to such uncertainties and risks, you should not place undue reliance on such forward-looking statements, which speak only as at the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law or by any appropriate regulatory authority.
It is not reasonably possible to itemise all of the many factors and specific events that could cause the Company's forward looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Among the factors that are subject to change and could significantly impact the Company’s expected results are the fuel costs, competition from new and existing carriers, costs associated with environmental, safety and security measures, actions of governments and regulatory authorities, fluctuations in currency exchange rates and interest rates, airport access and charges, industrial relations, the economic environment of the airline industry and the general economic environment in the markets to which the Company operates.
3 2013 First Half Results | 31 July 2013
H1 2013 highlights
Additional long haul capacity deployed and sold at a higher yield
Short haul performance has been positive however impact of weak trading on UK
routes not fully compensated by increased demand on other routes
H1 2013 loss is within our overall plan
On track for full year profitability in 2013 to be broadly in line with 2012
Seasonality in our business is increasing – importance of Q3 and Q4
Positive forward booking patterns for Q3 2013 however impact of recent hot weather
has potentially impacted close-in higher yielding sales in July/August
Pension resolution process is ongoing – Labour Court recommendation a significant
step forward
Ongoing pension discussions however are impacting progress on cost saving
measures
4 2013 First Half Results | 31 July 2013
Introduction to 2013 Aer Lingus first half results
2013 First Half Financial Review Andrew Macfarlane, Chief Financial Officer
2013 First Half Commercial Highlights Stephen Kavanagh, Chief Commercial Officer
CEO Comments Christoph Mueller, Chief Executive Officer
5 2013 First Half Results | 31 July 2013
2013 First Half Financial Review Andrew Macfarlane, CFO
6 2013 First Half Results | 31 July 2013
Note on comparative figures
20,000
2012 United extended code share
Reported as “Other revenue”
Ceased operation in Q4 2012
Not included in our passenger/capacity
statistics
Revenue in “Other revenue” Q2 to Q4 2013 – rate per block hour basis
Start-up costs Q1, subsequent costs ACMI only
Not included in passenger/capacity statistics
Approx. €50 to €60 million of additional costs
Overall expected to add approx. €2m- €3m to full year operating profit versus 2012 .... however
Uneven quarterly impact
2013
Aircraft back in our fleet, flying from Q2 2013
Full year of ownership costs (maintenance,
depreciation, etc.)
Included in our passenger/capacity statistics
Long haul (7th aircraft)
Contract flying business
Full year – 2013 vs. 2012
7 2013 First Half Results | 31 July 2013
€m Unless otherwise indicated
H1 2013 % Change H1 2012 Change €’m
Total revenue Q1 259.7 +3.3% 251.5 8.2
Q2 398.2 +6.2% 374.8 23.4
Total 657.9 5.0% 626.3 31.6
Operating profit/(loss) Q1 (45.5) (36.1) (9.4)
(before exceptional items) Q2 29.1 31.7 (2.6)
Total (16.4) (4.4) (12.0)
Exceptional items (9.3) (19.8) 10.5
Profit/(loss) before interest & tax
(25.7) (24.2) (1.5)
€m 30 June 2013 % Change 30 June 2012 Change €’m
Gross cash 1,015.8 1,049.9 (34.1)
Debt (513.7) (572.2) 58.5
Net cash 502.1 477.7 24.4
First half 2013 financial highlights
Strong revenue growth; timing and one-off factors impacting profit
8 2013 First Half Results | 31 July 2013
Cost
Increase in H1 2013 operating loss before exceptional items
Strong revenue performance, particularly on long haul. Costs higher due to extra aircraft, contract flying, maintenance and FX
Revenue
(4.4) 1.6
3.0
7.0
15.5
4.5 (8.0)
(2.0)
(5.0)
(3.0)
(3.1)
(6.6)
(3.8)
(5.0)
(5.8)
(1.3)
(16.4)
H1 2012 operating loss
Retail/Cargo revenue
SH revenue LH yield/LF LH capacity Other revenue LH fuel Depreciation Cockpit and cabin staff
Op. lease and o/h
Maintenance Maintenance - Other
Airport charges
Ground ops and other
Other gains/(losses)
Other H1 2013 operating loss
Approx. impact of contract flying/7th aircraft
€5m phasing issues affecting H1 2013
operating result –
expected to reverse in H2 2013
9 2013 First Half Results | 31 July 2013
Fuel analysis Q2 2013 Q2 2012 % H1 2013 H1 2012 %
Fuel burn – Long haul 44.3 37.5 18.1% 74.0 65.9 12.3%
Fuel burn – Short haul 80.9 82.4 (1.8%) 139.0 142.9 (2.7%)
Total fuel burn (‘000 tonnes) 125.2 119.9 4.4% 213.0 208.8 2.0%
Avg. price per tonne (US$) 1,006 1,011 (0.5%) 1,015 988 2.7%
Avg. price per tonne incl. into-plane (US$)
1,064 1,069 (0.5%) 1,072 1,045 2.6%
Total fuel cost (US$m) 133.7 128.9 3.7% 229.4 219.8 4.4%
Average FX rate for period 1.29 1.30 (0.8%) 1.31 1.31 0.0%
Total fuel cost (€m) 103.3 99.3 4.0% 175.6 167.9 4.6%
Fuel costs – volume and price
Volume increase driven by additional long haul flying
H1 2012 Fuel cost Price Volume – SH Volume - LH FX H1 2013 Fuel cost
167.9 4.4 (3.1) 6.4 - 175.6
10 2013 First Half Results | 31 July 2013
Airport charges and staff costs in H1 2013
Airport charges up €3.8 million
Staff costs up €6.2 million
138.9
142.7
4.7
1.0 (0.9) (1.0)
H1 2012 Price Volume FX Other H1 2013
131.7
137.9
5.0
1.2
H1 2012 Contract flying/ 7th aircraft
Other H1 2013
Price increases at LHR, Italian and Spanish
airports
Volume driven by long haul
Favourable FX due to better EUR/GBP rate
Pilot and cabin FTEs higher due to contract
flying and 7th aircraft
VS programme in progress. Majority of exits
backended in 2013 with full year benefit in 2014
11 2013 First Half Results | 31 July 2013
Maintenance and depreciation costs in H1 2013
Maintenance charges up €9.7 million
Depreciation up €4.3 million
Impact of contract flying and 7th aircraft
De-icing and winter maintenance programme
Volatility from engine provisioning – “other”.
Charge of €3.3m expected to reverse over H2
Contract flying/7th aircraft driving increase
A320 held for sale in 2012, depreciated in 2013
Other costs include premises and IT
37.0
41.3
2.0
0.8 1.5
H1 2012 Contract flying/ 7th aircraft
A320 held for sale
Other H1 2013
25.6
35.3 3.1
1.4 1.9
3.3
H1 2012 Contract flying/
7th aircraft
De-icing Winter maint. programme
Other H1 2013
12 2013 First Half Results | 31 July 2013
Ground ops and other gains in H1 2013
Ground ops & other costs up €7.0 million
Other gains down €5.8 million – US$ hedging
Catering/in-flight costs higher to support premium
“sky deli” offering and additional volume
IT cost increase due to recent investment
Operations cost up – more passengers, bigger
fleet, impact of contract flying/7th aircraft
Other – timing difference expected to reverse in
H2
57.6
1.0 1.3
2.4
2.3
64.6
H1 2012 Ground Ops
& Other
Catering/ In-flight
IT costs Operations Other H1 2013 Ground Ops
& Other
1.34
1.40
1.31 1.31
1.47
1.43 1.44
1.37
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
1.20
1.25
1.30
1.35
1.40
1.45
1.50
H1 2010 H1 2011 H1 2012 H1 2013
€ m
illio
n
Ave
rage
USD
$/E
UR
Rat
e
Other gains/(losses) Avg actual USD$/EUR rate
Avg hedged USD$/EUR rate
Gains from FX hedging programme reduce as
hedge rate closes in on market/spot rate
At 30 June 2013, $118m hedged for H2 2013 at
an average rate of 1.33 – full year hedging gains
likely lower than 2012
13 2013 First Half Results | 31 July 2013
Exceptional costs
20,000
H1 2013 H1 2012
Voluntary severance programme and other restructuring (5.5) (11.7)
Impairment of A320 held for sale - (3.8)
Professional & legal fees (Ryanair bid defence, pension etc.) (3.8) (4.3)
Total charge (9.3) (19.8)
Note: H1 2012 restructuring provisions included costs associated with the relocation of hangar maintenance activities at
Shannon and Greenfield initiatives.
Our voluntary severance programme announced in April seeking a headcount reduction of 100 has
received applications in excess of our target. The cost of 37 employees fully committed to exit at 30
June 2013 is reflected in the figures above. Further severance costs expected in H2 2013 as
employees fully commit to the programme.
14 2013 First Half Results | 31 July 2013
Free cash flow in H1 2013
Strong cash generation in H1 2013
Seasonal working capital inflow driving increase of €173.5 million in working capital
€ million
Free cash flow represents cash generated from operating activities less net capital expenditure (purchases of fixed assets exclusive of finance lease raised less proceeds from disposals) plus or minus net interest received/paid
(28.2)
151.9
41.3
(3.3)
173.5
(22.6) 1.4
(10.2)
Loss before tax Depreciation Provisions Working capital Net capex Net interest received Other (incl exceptionals)
Free cash flow
15 2013 First Half Results | 31 July 2013
Strong balance sheet in H1 2013
Gross cash increased by €107.3 million, debt reduced by €17.9 million
Gross Cash €m
Debt €m
Debt repayments
H2 2013: €22 million
2014: €119 million
2015: €87 million
(531.6) (513.7)
(2.6)
23.1 (2.6)
Gross debt December 2012
Interest accrued Debt repaid FX Gross debt June 2013
908.5
1,015.8
151.9
0.8 (23.1) (21.3)
2.8 (3.8)
Gross cash December 2012
Free cash flow (FCF) Interest accrued Debt repaid Dividend FX Investment in JV
Gross cash June 2013
16 2013 First Half Results | 31 July 2013
2013 First Half Commercial Highlights Stephen Kavanagh (CCO)
17 2013 First Half Results | 31 July 2013
H1 2013 H1 2012 % Change yr on yr
Passengers (thousand)* 4,570 4,511 1.3%
Load factor * 75.6% 73.6% 2.0 pts
Total seats (thousand)* 6,367 6,408 (0.6%)
Passenger revenue (€’million) 538.4 512.9 5.0%
Retail revenue (€’million) 87.1 84.5 3.1%
Cargo revenue (€’million) 22.3 23.3 (4.3%)
Average fare per passenger (€) 117.80 113.70 3.6%
Average fare per seat (€) 84.56 80.04 5.6%
Continuing growth in unit revenue
H1 2013 Commercial highlights
* Excludes Aer Lingus Regional services operated by Aer Arann, the “Wet lease” agreement with Virgin Atlantic Airways Limited and the Washington Dulles – Madrid code share service operated in partnership with United Airlines in 2012.
18 2013 First Half Results | 31 July 2013
H1 Short-haul performance
• Revenue growth and customers
maintained at 4.1 million while capacity
reduced
• Fare revenue per seat +2.6% to €64.66
• Load factor +1.8 points to 73.6%
• Average fare per passenger +0.7% to
€91.09
• Average sector length reduced by -2.8% to
1,012 KMs
• Combination drove RASK by +5.4%
• Demand led with bias for frequency build
supported by development of Aer Lingus
Regional
19 2013 First Half Results | 31 July 2013
H1 Long-haul performance
• Strong revenue growth of +15.6% and
capacity increase of +10.8%
• Growth in customers exceeded capacity lift
as load factor added 1.6 points to 79.1%
• Fare revenue per seat increased +4.5% to
€269.90 as load factor and average fare
improvements combined
• Business Cabin occupancy increased +3.6
points to 65.2%
• Increased frequency to Boston and Chicago
successfully introduced in Q2
• Network connectivity and Dublin Hub
remains central to long-haul performance
20 2013 First Half Results | 31 July 2013
H1 Retail performance
• Revenue growth of €2.6M or +3.1%
• Strong recovery in Q2 with retail revenue per
passenger increasing +5.8% to €19.00 in spite of
change in relative network mix
• Retail initiatives in H1 included:
– Pre-order meals
– Banded baggage charges
– Administration charge increase
– Extended seat selection range
• With more discretionary options in production:
– Annual bag pass
– Priority boarding
– Pre-order sky shopping
21 2013 First Half Results | 31 July 2013
Market Share ex-ROI
Market position
Source: DAA, CAA figures
4.7
4.9
5.1
H1 2011 H1 2012 H1 2013
Passenger Numbers (Including Aer Lingus Regional) - million
+4.3%
+4.1%
• Consistent passenger growth achieved through effective network management and capacity deployment
40%
44% 44%
H1 2011 H1 2012 H1 2013
• The Aer Lingus offering has maintained market share, grown passenger numbers and yield in a recessionary market
Passenger Development
22 2013 First Half Results | 31 July 2013
Trade through short-term issues …
23 2013 First Half Results | 31 July 2013
CEO Comments Christoph Mueller, CEO
24 2013 First Half Results | 31 July 2013
Q&A
25 2013 First Half Results | 31 July 2013
€m Unless otherwise indicated
Q2 2013 Q2 2012 Change %¹
Revenue
Passenger revenue 328.6 311.3 5.6%
Retail revenue 50.6 46.9 7.9%
Cargo revenue 10.8 12.3 (12.2%)
Other 8.2 4.3 90.7%
Total revenue 398.2 374.8 6.2%
Operating costs
Fuel (103.3) (99.3) (4.0%)
Staff costs (73.2) (66.7) (9.7%)
Airport charges (83.6) (82.0) (2.0%)
Other operating costs (109.0) (95.1) (14.6%)
Total operating costs (369.1) (343.1) (7.6%)
Operating profit before net exceptional items
29.1 31.7 (8.2%)
Appendix A – Q2 2013 financial highlights
¹ Sign convention: favourable/ (adverse)
26 2013 First Half Results | 31 July 2013
Forward fuel price as at 30 June 2013 and at 29 July 2013
Fuel Q3 2013 Forecast
Q4 2013 Forecast
H2 2013 Forecast
2014 Forecast
Estimated burn (‘000 tonnes) 131 106 237 503
% hedged 88% 75% 83% 35%
Avg. hedged US$ price / MT 983 962 974 954
Appendix B - Fuel hedging as at 30 June 2013
Current level of hedging gives good protection against fuel price inflation for remainder of 2013
890
920
950
980
1010
1040
1070
1100
Historic Price Forward Curve as at 28th June 2013 Forward Curve as at 29th July 2013 Jet CIF NWE (US$/MT)