Christoph Mueller, Aer Lingus CEO. 26 August 2010

Transcription

1 Christoph Mueller, Aer Lingus CEO 26 August 2010

2 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 forwardlooking 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. Slide 2

3 Welcome & introduction

4 Who we are Aer Lingus overview Headquartered in Dublin, Ireland We will celebrate our 75 th birthday in 2011 We operate 44 aircraft on routes to destinations in the UK, Europe and North America We carried 10.4 million passengers in 2009 We connect Ireland with the world by offering the best product in the Irish airline market at a competitive price to passengers We serve both leisure and business travellers with a quality core product that can be augmented through a la carte paid options Unlike some low cost operators, we serve central airport locations enhancing connectivity options for our passengers We offer this airport selection at more competitive fares than most legacy carriers 4

5 Phases in the Aer Lingus story The recent past Immediate actions to address issues Delivering results in H Re-positioning Profitable growth 5

6 The recent past

7 Yr-on-yr movements in GDP & passenger traffic remain linked except for Ireland Dublin Airport ¹ London Heathrow & Stansted ¹ 0.0% (5.0%) (10.0%) Q1 Q2 Q3 Q4 Q % 0.0% (2.0%) (4.0%) (6.0%) Q1 Q2 Q3 Q4 Q (8.0%) (15.0%) (10.0%) Irish GDP Dublin UK GDP London Heathrow & Stantsed Frankfurt Airport ¹ Charles de Gaulle & Orly ¹ 5.0% 5.0% 0.0% (5.0%) (10.0%) (15.0%) Q1 Q2 Q3 Q4 Q % (5.0%) (10.0%) Q1 Q2 Q3 Q4 Q German GDP Frankfurt French GDP CDG & Orly 10.0% 5.0% 0.0% (5.0%) (10.0%) (15.0%) Schipol Airport ¹ Q1 Q2 Q3 Q4 Q Dutch GDP Schipol Comment GDP trends continue to correlate closely with passenger traffic in most European territories except Ireland Outlook remains uncertain & IATA note that the post recession re-bound may be slowing ¹ Growth compared to same quarter of previous year 7

8 Core Irish market conditions remain difficult Comment Demand conditions remain weak in Aer Lingus core Irish market. Change in Passenger Numbers May 2010 Across all airports in the country (ranked by market size) However, the underlying trend of air travel to & from Ireland is well established and ranks significantly ahead of European peers: Country Pop. Air Pax Multiple Ireland 4.5m 26.3m 5.8x UK 61.6m x Germany 82.0m 158.2m 1.9x France 64.7m 117,.6m 1.8x EU m 751.4m 1.5x Source: Anna Aero 8

9 Immediate actions - to address demanding trading conditions Difficult to stop losses when Irish GDP declines by (7%) but we took corrective action Capacity Long haul capacity reduced by 22% in the second half of 2009 Yield Focus is higher yields per passenger rather than simply increasing passenger loads on aircraft Bases Gatwick losses deemed unacceptable & capacity scale-back announced in January 2010 Slide 9

10 Immediate actions Greenfield cost reduction programme launched Greenfield is significant and it is organisation wide Greenfield - 97m cost savings 97m of cost savings 74m from staff cost and 23m of other savings Cost base reduction target Workforce - 20% Back office functions - 40% Management positions - 40% Reduction of 170 of 600 Head Office building / support staff in 2011 / 2012 Non-Greenfield actions will be supported by IT investment and process re-engineering from % salary reduction Pay freeze until 2012 / 2013 Pay freeze will potentially avoid additional costs Airline 2m 10m 3m 4m 3m 9m 30m Cost Reduction 2009/10 20m % of Revenue (FY YE) Other = 23m 16m Cabin Crew Support Pilots Advertising Airport Charges Mtnce Other Staff Other Non-Staff Distribution Source: Company information Sector cost reductions Staff = 74m % of Op Cost (FY YE) British Airw ays 220m 2.40% 2.60% Air France 700m 2.90% 3.10% Aer Lingus 97m 7.15% 7.44% Source: Company announcements (FY YE =last reported). Note (2): Excludes restructuring costs (2) Larger relative cost reduction programme than competitors Slide 10

11 Delivering results in H1 2010

12 H Delivering positive performance in difficult conditions H highlights Improved performance despite air space closures & still declining demand in primary Irish market Significant swing in Q profitability compared to prior year Both long haul & short haul operations were positive at EBITDAR level in H m Operating profit Q1 Q2 H1 19 Upward trajectory in unit revenue trend (20) (18) (19) Affirmation of revised approach to inventory & network management (40) (60) (38) Financial position remains very robust Extremely robust cash position of over 1bn at end of June 2010 (80) (100) (75) (93) However, cost reduction programme remains critical Slide 12

13 H Business overview Commercial highlights Following a challenging 2009, the first 6 months of 2010 witnessed the turnaround of long haul operations with increased seat occupancy and higher yields. Short haul performance was supported by a shift in customer booking patterns to dates closer to the flight departure. Commercial impact of air space closures in Q has been successfully mitigated and the forward booking profile has recovered. Both long haul and short haul operations are now benefiting from remedial actions taken in late 2009 and early

14 Long haul turnaround supported by network management Long haul performance overview Demand opportunity developed via network management and partnership. Connecting traffic flows complementing point to point demand. Revenue management and pricing strategy adjusted to reflect this new demand environment. Consistent on-board product introduced across A330 fleet. Strong unit revenue improvement delivered by combination of yield and load factor improvements. Cargo volumes continue to improve year-on-year 14

15 Long haul turnaround supported by network management Long haul yield per ASK growth vs Long haul ASK capacity vs % 31.1% Q1 10 Q2 10 H % Q1 10 Q2 10 H1 10 (31.8%) (31.3%) (31.6%) Long haul yield per passenger growth vs Long haul load factor vs % 17.5% pts pts 12.4% pts Q1 10 Q2 10 H1 10 Q1 10 Q2 10 H1 10 H Results August

16 Strong short haul yield growth in H Performance overview Management of revenue per seat metric and not yield or load factor. Demand led capacity planning and deployment. Flight schedules adjusted to reflect time or price sensitive market requirements. Underlying or natural demand managed with reduced reliance on promotional activity. 16

17 Strong short haul yield growth in H Short haul yield per ASK growth vs Short haul ASK capacity vs % 4.9% 4.3% Q1 10 Q2 10 H1 10 (5.3%) Q1 10 Q2 10 H1 10 (2.2%) (12.8%) Short haul yield per passenger growth vs % Short haul load factor vs Q1 10 Q2 10 H % 3.0% Q1 10 Q2 10 H1 10 (1.8) pts (1.5) pts (1.9) pts H Results August

18 H Ancillary revenue growth Overview Continued growth in ancillary revenue per passenger with a 7.8% increase in H compared to corresponding period in Volume decline resulting from planned capacity reduction contributed to 3.9% decline in total ancillary revenue. Ancillary revenue per passenger Strong year-on-year performances from: Online booking fees Baggage fees Card fees Seat selection revenues H1 07 FY 07 H1 08 FY 08 H1 09 FY 09 H1 10 New fare family and bundled products being trialled at present. 18

19 H EBITDAR costs m unless stated otherwise H m H m Change % Direct operating Costs (1.9%) Distribution costs (4.6%) Airport charges (3.1%) En-route charges (4.6%) Maintenance (36.3%) FX hedging (gain) / loss (15.3) (20.7) (26.1%) Total ex-staff & fuel costs (6.3%) Staff costs (10.8%) Total ex-fuel (8.1%) Fuel (30.3%) Total incl. fuel (15.3%) H Results August

20 H Cash & debt m Cash Debt Balance as at 31 st December Free cashflow Net debt drawn / (repaid) FX impact Interest accrued Balance as at 30 th June , Restricted cash 59.5 H Results August

21 Ash cloud disruption - cost of air space closures has been contained Ash cloud response Aer Lingus reacted effectively to unprecedented closure of Northern European airspace in April & May Management confident that the total impact on Aer Lingus operating result will be a maximum of 20m Total cost as percentage of revenues is in line with peers No. of Aer Lingus flights disrupted Disruption periods Estimated lost gross margin Estimated passenger compensation costs 2,128 2 significant periods of disruption in April & May Approx million Approx million AF-KLM¹ Air Berlin¹ BA¹ Aer Lingus¹ Ryanair¹ easyjet¹ 158m impact 40m impact Stg 142m impact 20m impact 50m impact Stg 65m impact 0.8% of revenues 1.2% of revenues 1.4% of revenues 1.7% of revenues 1.7% of revenues 2.4% of revenues ¹ Derived from company announcements & most recent annual financial statements 21

22 Re-positioning for long term growth

23 Next steps to implementing our new strategy Satisfying customer needs Bespoke a la carte enhancements Fare families Introduction of EPOS handsets to further drive ancillary revenues Working with the Dublin Airport Authority State of the Art terminal will welcome visitors to Ireland Development of Dublin Airport as a strategic transfer point Slide 23

24 Re-positioning Aer Lingus for long term growth Network Focus on our core mission: Connecting Ireland with the World Distribution Multi-platform strategy adopted to individual markets Product Quality core product with paid value enhancing options Slide 24

25 Next steps to implementing our new strategy Connectivity Filling-in our existing short haul network Aer Lingus code now extended across North America Slide 25

26 Aer Lingus role in industry consolidation Network connectivity is key for us as we seek to connect Ireland to the World Aer Lingus benefits from excellent relationships with members of the Oneworld, Star & SkyTeam alliances as well as our own partnership initiatives OneWorld Star SkyTeam Bilateral These relationships provide us with a quality partner network with real depth Asian connectivity remains the main gap in our current network We are likely to join one of the 3 alliances in the medium term but no decision has yet been taken We will evaluate which of the 3 alliances is best suited to deliver a better product for our customers and a return on investment for shareholders Slide 26

27 Partnerships Update United Airlines extended code share Washington Madrid commenced on 28 March 2010 Aer Lingus Regional franchise Launched by Aer Arann in March with 4 of its aircraft serving 12 routes Positive trading result at operating profit level 100K+ passengers carried to date Performance meeting United Airlines and Aer Lingus expectations Meeting Aer Lingus network and franchise revenue expectations Partners are reviewing opportunities for an additional aircraft in th ATR72 added to franchise by Aer Arann in August to commence Shannon services. Both initiatives have already positively impacted the operating result despite only commencing in late March

28 Greenfield cost reduction programme remains imperative Cost challenge Continuing challenge is to actively control upward cost pressures Fuel costs are volatile over time Operating environment remains difficult A busy Summer season does not represent easing of operating environment & return to pre-recession demand levels 2010/11 winter season will be more a difficult period to sustain recent yield performance We cannot be complacent on costs Cannot assume recent growth in yields will continue indefinitely Industry is already adding capacity with effect on long term yields Yields maximisation cannot compensate for cost inflation H Results August

29 Decisive action taken on key issues Transatlantic services Turnaround of long haul operations a crucial step for the company Action taken to address loss making Shannon winter services Aer Lingus remains committed to Shannon transatlantic services for rest of year Dublin Airport Terminal 2 Agreement with DAA to commence transfer of operations from November 2010 Aer Lingus passengers to benefit from US Custom & Border Protection facilities Property consolidation Positive steps taken to reduce property portfolio Includes surrender of leasehold interest in the Head Office Building site to DAA Financial & operational benefits will accrue to Aer Lingus Dublin Maintenance Base maintenance contract awarded to Dublin Aerospace Services previously undertaken by Sabena Technics in France Aer Lingus proud to support development of Irish air maintenance activities Management changes Chief Operating Officer Trevor Jensen appointed on 29 April 2010 De-layering of organisational structure under way 40% of remaining management positions with new appointments H Results August

30 Aer Lingus Progress on key objectives Significant turnaround in profitability of long haul operations Revised revenue management strategy is generating positive results Financial and operational impact of ash cloud disruption contained United Airlines extended code share is delivering proof of concept Cargo performance continues on positive trajectory IT implementation remains on track 30

31 2010 Trading outlook Outlook comments Cash drain addressed through remedial actions Strategic actions are on track Strong commercial performance at end of H Full year operating result (before exceptional items) should be no worse than breakeven However, this view is heavily dependent on delivery of committed staff productivity savings and no significant disruptions to operations from industrial action or further airspace closures It is premature to provide firm guidance on likely performance in However. Expected improvement in 2011 costs as a result of continued implementation of Greenfield programme H Results August

32 Q & A

33 Thank you!