The crisis of the international aviation industry has left its imprint on the earnings figures of the Austrian Airlines Group in 2009. In the first three quarters of the year, Austrian Airlines posted a net result for the period of EUR – 242.3m, compared to EUR -65.1 m in the first nine months of 2008. The business results contain extraordinary items with a major impact on earnings, i.e. impairment losses on aircraft totaling EUR -76.1m, and restructuring provisions of EUR -115.5m. The adjusted result from operating activities (EBIT) during the period January-September 2009 amounted to EUR -64.4m, down from EUR -22.5m in the comparable period of the previous year. However, Austrian Airlines posted an improvement in the third quarter, generating an adjusted EBIT of EUR 24m, outperforming Q3 2008 (EBIT of EUR -0.3m) and achieving the first positive operating results in the current financial year.
 
“The measures being implemented are beginning to take hold. Our performance figures for the third quarter improved when adjusted for the extraordinary items,” according to the Austrian Airlines Management Board members Peter Malanik and Andreas Bierwirth: “However, we should not fool ourselves. The crisis is brutally manifesting itself. The earnings figures relentlessly show our weaknesses. They demonstrate that we still have a lot of work ahead of us in order to be able to successfully restructure the company and make it profitable.” 

Austrian Airlines is implementing a comprehensive restructuring concept entitled “Austrian Next Generation.” The concept has three cornerstones:  

1. New market and fleet strategy: Austrian Airlines will remain a network carrier and maintain its strong position in Eastern Europe. We will continue to serve our niche markets in Eastern Europe, but will concentrate more on expanding service to volume markets with high passenger traffic. We want to gain additional market share in these volume markets in Western and Eastern Europe by offering high quality service at attractive prices. In order to achieve this, it will be essential to significantly reduce our unit costs. This will be achieved by deploying larger aircraft, making adjustments to our route network and increasing the number of seats in our aircraft.      
2. Cost reductions: We will increase our overall competitiveness by massively cutting costs. We will create new processes and streamline the company. The total workforce will be cut from 7,500 full-time employees down to a level approaching 6,000 people by the end of 2010. We will also reduce prices charged by our suppliers. We are implementing the EUR 150m package of measures as the basis for pruning personnel expenses. Moreover, we will negotiate with the Works Council to reform collective wage agreements in order to raise productivity.  

3. Synergies with Lufthansa: We will work with affiliated companies of the Lufthansa Group to exploit synergies. For example, we will merge our sales offices abroad with those of Lufthansa. We are also developing a similar concept for our ground operations. We will take advantage of Lufthansa’s sales tool and work closely with its procurement teams to increase our purchasing power.   

Austrian Airlines aims to achieve a positive cash flow in 2010. In the upcoming years we also want to generate a positive EBIT and thus be in a position to earn the funds required to finance our capital expenditures.     

“Developments over the past few months demonstrate that we are on the right path, but we must continue to work determinedly. We have a good chance to achieve our goals if we consistently implement our concept,” say Management Board members Bierwirth and Malanik.

Business results for the first nine months of 2009
In the first three quarters of 2009, EBIT amounted to EUR -225.4m (previous year: EUR -42 m). This includes significant extraordinary items, i.e. impairment losses on aircraft totaling EUR -76.1m, along with restructuring provisions of EUR -115.5m. If EBIT is adjusted to exclude these extraordinary items and other effects, e.g. proceeds from the sale of aircraft, other costs related to the transfer of aircraft and foreign currency valuations at the reporting date in addition to the above-mentioned impairment losses and restructuring provisions, the adjusted EBIT gives a better indication of the operating performance of the company. The adjusted EBIT in the first nine months of 2009 was EUR -64.4m, compared to EUR -22.5m in the comparable period of 2008.  

The financial result deteriorated slightly in the first nine months of 2009 to EUR -30 m, down from EUR -24.9m in the previous year. The result before tax thus amounted to EUR -254.6m (previous year: EUR -56.7m) and the net result for the period was EUR -242.3m (previous year: EUR -65.1m).

Key figures:
CVA was down to EUR -209.2m (previous year: EUR -32.4m). The earnings per share totaled EUR -2.85.  
 
The number of employees measured in full-time equivalents amounted to 7,391 on average in the first nine months of 2009, compared to 7,930 in 2008.
The passenger load factor declined by 1.8 percentage points to a level of 73.9%, down from 75.7% in the previous year. The total number of passengers carried fell by 12.8% to 7,573,304 (previous year: 8,682,788). Austrian Airlines reduced capacity by 12% as measured in available seat kilometers, to 17,417.5m (previous year: 19,802.8m). The revenue passenger kilometers (RPK) decreased by 14.1%, to 12,865m (previous year: 14,985.2m). 

Revenue and operating revenue
Total flight revenue fell by 21.2% in the first nine months of 2009 to EUR 1,424.2m (previous year: EUR 1,816.5m), which can be attributed to the extremely weak market development. Charter revenue was down 19.2%, to EUR 140.2m (previous year: EUR 173.6m). Operating revenue decreased by 18.9%, to EUR 1,573.4m (previous year: EUR 1.941 m).  

Operating expenses
Based on the decline in demand, all production-related expenditures decreased i.e. particularly landing fees, handling and en route charges, passenger servicing fees and commissions, with the exception of technical costs, which for its part increased due to scheduled aircraft overhauls. In a year-on-year comparison, total jet fuel expenditure fell 37.1% to EUR 279.1m in the first nine months of 2009 (previous year: EUR 443.7m). On balance, expenses for materials and services amounted to EUR 975.3m, down 21.3% from the level of EUR 1,239.6m in 2008.  

In the first nine months of 2009, Austrian Airlines implemented numerous measures designed to reduce personnel expenses, including short-time working and deferred compensation. In addition, the average number of employees declined from 7,930 in 2008 to 7,391 in the first three quarters of 2009. These measures were in contrast to the exceptional charge of EUR 115.5m for restructuring provisions. Accordingly, total personnel expenses in the period January-September 2009 amounted to EUR 458.8m, a rise of 17.5% from EUR 390.4m in the previous year. However, adjusted for the restructuring expenses, personnel expenses actually totaled EUR 343.3m, a decline of 12.1% below the comparable level in 2008.

Depreciation and amortization of tangible and intangible assets rose by 24.5%, from EUR 196.7m to EUR 244.9m, which is primarily related to the impairment losses on aircraft of EUR 76.1m. 

On balance, operating expenses in the first nine months of 2009 were EUR 1,798.8m, a decline of 9.3% from the comparable figure of EUR 1,983 m in 2008. The adjusted operating expenses, excluding the restructuring provisions of EUR 115.5m and the impairment losses on aircraft of EUR 76.1m, amounted to EUR 1,607.2m, a drop of 18.1% from the previous year. 

Segments
The overall market decline was reflected in the performance of all three segments of the Austrian Airlines Group in the first three quarters of 2009.  

Scheduled services segment: Flight revenue was down 21.8%, to EUR 1,284 m (previous year: EUR 1,642.9m), whereas EBIT fell to EUR -207.6m in the first three quarters of 2009 (previous year: EUR -41 m). Unit revenue was down 10.6% to 11.4 euro cents (previous year: 12.7 euro cents). The passenger load factor decreased by 1.8 percentage points to 72.9%, a decrease of 74.7% compared to 2008. 

Charter segment: Flight revenue dropped by 19.2% to EUR 140.2m (previous year: EUR 173.6m). EBIT amounted to EUR -20.8m in the first nine months of 2009 (previous year: EUR -4.7m). The passenger load factor was down 0.5 percentage points to 81.9% (previous year: 82.4%).  

The complementary services segment encompasses activities such as third-party passenger handling, technical services and aircraft leasing. Revenue at EUR 210.1m was practically the same as the comparable figure of EUR 210.3m in 2008. EBIT was EUR 3 m (previous year: EUR 3.7m).

Fleet
In March 2009, we sold and transferred one Dash 8-300 to the Canadian airline Air Inuit. In March, we reached an agreement with the aircraft manufacturer Bombardier to move up the delivery date for one of the four ordered Q400 aircraft from November 2010 to October 2009. 

Due to the general decline in market demand, we reduced capacity and temporarily put three Airbus A320 aircraft and three Canadair Jet CRJ200 aircraft out of service.

In the first quarter, we commenced work on refitting Boeing 767-300ER jets with winglets, upturned ends on the tips of wings which improve the aerodynamics of passenger aircraft. As of the end of the September 2009, four aircraft in the Austrian Airlines fleet had already been refitted with winglets, as scheduled. This measure will enable savings of approximately 5% of the fuel consumed, or about 1,000 tons of kerosene for each aircraft which has been converted.
 
Earnings figures at a glance:

1 Results from operating activities (EBIT) before associates, depreciation and rentals. 2 The expected income from plan assets was reclassified from personnel expenses to financial expenses. 3 Adjusted by the result from the disposal of assets, other costs related to the transfer of aircraft, foreign currency valuations at the reporting date as well as impairment losses on the value of aircraft.

The detailed Austrian Airlines Group quarterly report (January-September 2009) is available on our Website at: 
http://www.austrianairlines.co.at/eng/Investor/reports/default.htm
 
Owner, editor, distributor: Austrian Airlines AG, Corporate Communications, public.relations@austrian.com. Further information concerning the disclosure pursuant to § 24 and § 25 Media Act is available at www.austrian.com.