Austrian 410 million loss in 2008Austrian sees loss of 410 million Euros
Verluste bei Austrian <br /> Cripplingly high fuel prices and rapidly falling demand for flights due to the economic slump had an unmistakable impact on the results of Austrian from the fourth quarter onwards.
Dr. Andreas Bierwirth, member of the Austrian Executive Board said the following about the Annual Result 2008: “The business trend of the Austrian Airlines Group was decisively shaped in 2008 by the markedly negative economic environment around the world. Despite this challenging economic environment, we have stuck consistently to our Focus East strategy, continuing to expand our key markets in Central and Eastern Europe and the Middle East, introducing the innovative Premium Service into the Middle East, and implementing numerous improvements in our quality and service. In this way, we have succeeded in holding passenger volume relatively stable at 10.7 million passengers carried despite the challenging economic environment, ensuring that flight revenue, at EUR 2,361.0 million, was only slightly down on the previous year. Despite this, a number of factors – most notably the 31.5% jump in fuel expenditure –produced a fall in our EBIT from operating activities, to EUR –312.1 million. The EBIT adjusted for one-off effects stood at EUR –35.2 million, again below last year’s figure. One-off effects not having an effect on payment, the majority of which were based on depreciation of aircraft, produced a significant burden totalling EUR 334.4 million. Consequently, the Group recorded an annual result after taxes of EUR – 429.5 million.”
Against this backdrop, the EBIT of the Austrian Airlines Group declined significantly to EUR –312.1m, down from EUR 42.1m in 2007. This development is primarily related to the increase in expenses for materials and services, in particular the rise in fuel expenditure by 31.5%, to EUR 581.0m, and the considerable weakening of demand which especially impacted the company in the fourth quarter of 2008. The adjusted EBIT, which took account of one-off effects (in particular impairment losses on aircraft in use for the longer term and the depreciation of capitalised deferred tax assets) amounted to EUR –35.2m, which was also below the previous year’s figure of EUR 55.7m.
The reason for the increase in total fuel expenditure was the price explosion for jet fuel in 2008, a development which was not even foreseen by experts. The average kerosene price for jet fuel of USD 1,070/ton represents a rise of 55.6% compared to 2007. The fuel price was initially slightly above USD 918/ton at the beginning of 2008, falling slightly in January and then rising continuously throughout the year to reach a preliminary year’s high of over USD 1,400/ton at the end of May. Following a slight drop in the fuel price in June, the fuel price reached a record level of USD 1,452/ton on 3 July 2008. The subsequent downward trend in fuel prices considerably eased tension on the global oil market. On 31 December 2008, the kerosene price was USD 437.75/ton.
In 2008, the Austrian Airlines Group continued its fuel hedging programme launched in 2007, which is designed to successively hedge up to 20% of the company’s annual kerosene requirements in order to level out and stabilise kerosene costs in the medium-term. Due to the increasing uncertainties on the marketplace and the volatile forecasts of experts, the Group expanded its hedging strategy in July 2008 to encompass call options, as a means of safeguarding the company’s total fuel requirements for the rest of 2008 against further fuel price rises.