AIR BERLIN PLC. ANALYSTS & INVESTORS PRESENTATION Berlin, 16 March 2012

Transcription

1 AIR BERLIN PLC ANALYSTS & INVESTORS PRESENTATION Berlin, 16 March 2012

2 2 AGENDA Analysts & Investors meeting, 16 Mar page Topic 1 Review 3 Topic 2 Overview 2012 Macro-economic development Focusing the business model Measurements to improve profitability Outlook

3 3 has mainly been influenced by factors which were beyond the control of airberlin Fuel & Dollar Negative development of both led to: cost increase and the need for further price increase especially in smaller catchments this led to a drop in SLF as demand fell Cautious consumer behavior Late booking pattern leading to less ability to forecast bookings $ AT Aviation tax imposed a heavy burden as this presented close to 5% cost increase on top of fuel EUR 166 m burden in Arab Spring loss of profits to North Africa destinations change of the capacity alignment lower margins in other leisure destinations due to overcapacity issues

4 airberlin reacts to the economic pressure by launching a new efficiency program Initiatives taken to strengthen airberlin s position in a competitive market A B Shape & Size - Our fitness program A comprehensive program to improve profitability Network optimization Optimized corporate organization Cost reduction Reduction of complexity Financing activities Aircraft sliding to improve the CAPEX (Investment reduction by $ 508 m in 2012 and by $ 1,128.4 m in 2013 * ) and reduce capacity pressure Bond issuance in November EUR 100 m C D Sharpening the Business model offering a worldwide network for business and leisure with access through multi distribution channels New partners Etihad and airberlin entered a deep strategic partnership covering commercial activities on network and sales plus financial involvement making Etihad the largest shareholder oneworld membership with effective date 20 March 2012 to strengthen and well position airberlin for the future * based on current average list prices as of 10/25/11 4

5 * pro forma (PF): incl. NIKI 1H 5 Financial Performance REVENUE EBITDAR Revenue increase of 10 % compared to 2010 driven by increase in SLF and Yield 3, % 4,227.3 Huge cost increases especially from aviation tax (EUR 166 m) and fuel (EUR 229 m) and non-recurring items in 2010 impacted EBITDAR negatively despite revenue growth % EBIT 2010 PF NET income 2010 PF Next to the EUR 194 m negative swing on EBITDAR level, higher cost of AC (USD impact) led to negative EBIT swing of EUR 230 m PF Net income development is in line with EBIT development; within financial result app. EUR 39 m negative from MTM evaluation and FX development PF

6 * pro forma (PF): incl. NIKI 1H 6 airberlin's revenue increased by 10 % compared to previous year Revenue split [EUR m] Change from FY 2010 PF +13.2% +1.5% +9.2% +62.0% -1.7% +9.2% 2,623.1 Seat only 1,233.9 Charter 3,857.0 Flight revenue 78.0 A/P tax revenue 38.6 Onboard sales Others +9.8% 4,227.3 Total revenue Charter increased by only 1.5% especially due to Northern Africa crisis and subsequent capacity shifts and due to price pressure Seat only grew strongly due to yield and load increase Onboard revenue slightly decreased due to reduction in long-haul operation Growth in cargo revenue is the strongest driver for other revenue

7 Operational development good total revenue per ASK performance Capacity [m] Passengers [m] Seat load factor [%] Yield 1) [EUR] +7.9% Revenue 1) /ASK [EUR ct.] % % +1.7%p % PF 2010 PF 2010 PF 2010 PF 2010 PF Yield = Flight revenue per passenger // Revenue = total revenue * pro forma (PF): incl. NIKI 1H 7

8 * pro forma (PF): incl. NIKI 1H 8 Cost/ASK on EBIT level in burdened by fuel and aviation tax Cost/ASK incl. fuel & aviation tax [EUR ct.] +12.3% Cost/ASK excl. fuel [EUR ct.] Cost /ASK excl. fuel & excl. aviation tax [EUR ct.] % % PF 2010 PF 2010 PF Fuel A/P charges Personnel MRO Aviation tax Leasing & AFA Navigation Others

9 * pro forma (PF): incl. NIKI 1H 9 Development of Expenses Direct operating expenses [EUR m] Personnel expenses [EUR m] Other operating expenses [EUR m] +20.9% 2,717.5 Airport charges 2, Aviation tax MRO % Fuel Navigation Catering incl. onboard sales Others , % Insurance Marketing Distribution Other PF 2010 PF 2010 PF

10 * pro forma (PF): incl. NIKI 1H 10 Cost of aircraft ownership Lease & depreciation expenses [EUR m] Development of number of aircraft [#] % A320 family Leases A330 family B737 family E190 DH8H Depreciation PF Dec 2010 Additions Disposals / Lease expires Dec B767/757

11 11 Financial result 2010 vs. Breakdown of financial result [EUR m] Income Expenses Currency & derivatives effects +28% -58% +44% Interest income increased Interest expenses were higher in 2010 due to buyback of convertible bond Market to market effects due to USD rate development; non-cash

12 12 Equity and liquidity position of airberlin Development of equity and liquidity [EUR m] EQUITY affected by buyback of convertible bond and loss loss nearly cut equity in half 2009 end hedge account./oci Loss Redemption convertible bond/other 2010 end hedge account./oci Loss Redemption convertible bond/other end LIQUIDITY end Operational CF Invest CF Financial CF 2010 end Operational CF Invest CF 87.6 Financial CF end 2010 sale of aircraft and repayment of debt to mitigate weaker operational cashflow Negative operational cashflow reduced liquidity Financial cashflow and investment cashflow nearly matching

13 13 Balance sheet ratios Balance sheet structure, 2010 vs. [EUR m] B/S as of December 31, 2010 B/S as of December 31, Fixed assets Other current assets 64% 19% 2,370 21% 79% Equity Fixed assets 66% 2,264 11% Debt 89% Other current assets 23% Equity Debt Equity and liquidity decrease due to loss in Net debt impacted by liquidity swing, onbalance financing of aircraft and stronger USD Liquid assets 17% Liquid assets 11% Net debt: 489 Net debt: 813

14 14 AGENDA Analysts & Investors meeting, 16 Mar page Topic 1 Review 3 Topic 2 Overview 2012 Macro-economic development 15 Focusing the business model Measurements to improve profitability Outlook

15 15 Economic situation across Europe affects demand for air travel Europe The debt crisis has not come to an end and continues to negatively impact the European economies Financial turbulences in the Eurozone lead to slow-down of economic growth European economy moving towards modest recession in 2012 Germany Economic growth expected with 0.7% Stable economy, but uncertain business situation Cautious consumer behavior Assessment of the current business situation cooled notably since mid Portugal Danger of debt restructuring impends Recession in 2012 by more than -3% Euro Greece EU rescue package Bailout strains Greek-German relations Spain Difficult financial situation Unemployment high and still rising Italy Recession (by approx. 1.5% in 2012) Industrial production -5% in January

16 remains a challenging year airberlin reacts to the challenges in 2012 Encouraging signs from the US economy are offset by the persisting crisis in the eurozone. However, if the crisis in the eurozone cannot be solved permanently, IATA expects the international aviation industry to incur a loss. SHAPE & SIZE 2012 PARTNERSHIP with ETIHAD AIRWAYS It is expected that the aviation industry will be facing additional costs from national air travel surcharges and the introduction of emissions trading. oneworld Optimization of airberlin`s network

17 17 AGENDA Analysts & Investors meeting, 16 Mar page Topic 1 Review 3 Topic 2 Overview 2012 Macro-economic development Focusing the business model Measurements to improve profitability Outlook

18 Customer Service 18 Etihad and oneworld allow airberlin further strategic development towards a full service airline airberlin strategic development transformation process HYBRID CARRIER FULL SERVICE AIRLINE BUSINESS LOW COST LEISURE Stand-alone airline (cooperation with NIKI) 135 destinations (mainly Europe) Global network (from America to Asia) alliance member Global positioned frequent flyer program (topbonus) Full service airline (lounge, priorities, etc.) Timeline

19 19 airberlin offers significant advantages to their guests Network of airberlin, Etihad and oneworld NETWORK Brand for business and leisure travelers Attractive mix of leisure and business destinations Three major hubs in Germany/Austria with access to America and through the hub in Abu Dhabi to Asia, India and Australia Huge variety of distribution channels (online, travel agencies, TOPs, GDS) COST Competitive cost structure GUEST SERVICE Unique combination of attractive prices and full service Business class product on long-haul services Worldwide lounge access FREQUENT FLYER PROGRAM Integration Etihad and in oneworld with full compatibility

20 20 New inventory and revenue management system enables cost advantages and revenue increase reduction of complexity EVOLUTION Business traveler Flight planning Integrated flight planning with priority on profitability Cost Pricing Intelligent Pricing through all channels and markets business segmentation Revenue Network traveler Leisure traveler Separated booking systems Separated revenue management systems Service to customer Versatile services for different customer groups Cost RASK Higher load and yields Revenue PROFITABILITY INCREASE Integrated view on business and leisure travelers

21 21 AGENDA Analysts & Investors meeting, 16 Mar page Topic 1 Review 3 Topic 2 Overview 2012 Macro-economic development Focusing the business model Measurements to improve profitability Outlook

22 Late one-off bonuses TXL and DUS for identified (EUR 5.2 m) Outsourcing customs warehouse in discussion Module target decreased by EUR 2.0 m Conceptual preparation for model for base jumper discussed with crew planning Production adjustment (FY -3%) not completely compensated Required flexibility in flight program decrease productivity target Contracts for reduction/ optimization CUSS/ SSK in various airports finalized One-off payment regarding CUSS / SSK agreed Pilot Fuel Coaching campaign started Post flight analysis software to be installed (belair and NIKI) Awareness campaign for cockpit and cabin crew started Meeting with ATC & GOPS PMI conducted Implemented Flexibility of current system analyzed Number and type of flight changes analyzed Complexity costs evaluated Server solution for video conferencing tool, contract signed with cost savings of EUR 0.1 m The module responsibility changes to the new CHO Planning on level SVP/EVP to be prepared until 8 Mar 12 Increase of target for module by EUR 1.5 m Cost reduction through optimized use of printers and copiers identified Additional airport marketing support negotiated (EUR 0.4 m) Fuel measure to reduce cost index implemented (EUR 0.7 m) 22 Measures with important effects on revenue and profitability 3.1 Airport sourcing 3.2 Onboard services 3.3 Crew base concept 3.5 Crew productivity / travel 3.6 Enhancing ecki Fuel saving 3.8 PMI punctuality 3.9 Compensation payments 3.10 Future OCC IT 3.12 Overhead 3.13 Procurement / admin cost saving 3.14 NIKI cost Cost initiatives Process improvement Maintenance 6 Profitability improvement Network reduction & productivity Yield & Revenue mgmt Alliances Yield optimization 1 2 Ancillaries Points of Sale Systems 3

23 23 add up to a total EBIT improvement of more than EUR 200 m in > 10 m 5 > 55 m 4 > 10 m Cost initiatives Process improvement Maintenance Profitability Improvement EUR Network reduction & productivity Yield & Revenue mgmt Alliances > 70 m > 20 m > 45 m EBIT values without effects from cost avoidance

24 24 EBIT improvement >EUR 200 m in 2012 with increasing impact in the course of the year Share of Total 13% 22% 31% 34% Effect in EUR m >25 >45 >60 >70 <200 Description Implementation of measures mainly in Q1 and Q2 Realization of effects predominantly in Q3 and Q4 (65%) Q1 Q2 Q3 Q Implementation Realization

25 25 Yield- and Revenue improvement measures 1 Examples > 70 m Yield & Ancillaries Optimize existing distribution channels and support additional opportunities, e.g. alliances Increase of yield in significant business segments Additional ancillary revenue through offering of new services to customers (e.g. piece-concept) Enhancing points of sale Increase in market share in international markets with a high airberlin presence Push principle for selected distribution channels in Offlinemarkets Systematic opening up of new customer segments, distribution and sales channels, e.g. in Spain Systems Improvement of the sales platform to increase revenue in new business segments Installation of new Revenue Mgmt System to efficiently manage availabilities & tariffs Systems as enabler for yield- and revenue improvements

26 26 Our all-encompassing cooperation with Etihad Airways opens a new world of destinations Etihad partnership More attractive corporate contracts due to wider network Increase passenger flows through code share Joint sales and distribution channels Joint frequent flyer program Joint network with aligning hub traffic Cabin crew training; joint simulators Joint procurement Airport sourcing > 20 m 2

27 27 With oneworld airberlin enters into an attractive alliance oneworld alliance Codesharing and interlining with partners to multiply the number of airberlin destinations offered Substantial increase of seat load factor Enhancing attractiveness by offering joint products, e.g round-theworld tickets through linking the airberlin topbonus program to the frequent flyer programs of other partner airlines Offer seamless travel to all customers on all oneworld flights > 20 m 2

28 28 Cut of unprofitable routes and related capacities increases efficiency & allows fleet optimization Network reduction Reduction of fleet from 170 to 152 aircraft will decrease cost of aircraft ownership per block hour by more than 9% Elimination of unprofitable network elements and optimization of fleet rotation Increase of aircraft productivity by 7% Optimize cycles to reduce crew travel and unproductive working hours Focus on high frequency destinations > 45 m 3

29 29 Maintenance savings through strategic procurement, improved planning and material logistics Maintenance Strategic procurement Optimization of material- and demand management over the group Improvement of logistic processes within supply chain management Synergies from further integration of NIKI maintenance in airberlin group maintenance function Additional revenues from maintenance services to third parties > 10 m 4

30 measures for consequent ongoing cost reduction > 55 m 5 Fuel airberlin as industry benchmark fuel consumption < 3.5 litres per 100 PKM airberlin fleet with Ø age of 5.3 years Ongoing initiatives for additional reduction of 31.5 thousand tons weight reductions optimized engine washes use of more recent wind & temperature data optimized speed Airport sourcing Scale effects through focus on less destinations Improvement of contracts with handling agents and streamlining of service level agreements Bundling of procurement and ground-handling Crew productivity Mainly driven by network and fleet optimization Reduction of flight overtime through optimized crew planning Reduction of crew travel expenses through consequent planning of crew cycles and avoidance of proceedings

31 31 Process improvement further enhances profitability 6 > 10 m Operational performance Increase punctuality Quicker check-in process to increase customer satisfaction Developing an integrated Operations Control Center Bundling at stations Implementing single aircraft strategy Closing and pooling together of stations (crew and maintenance) Scale effects on airport conditions Ground efficiency Reduce personnel costs by placing additional self service counters at airports Ground handling staff only for passengers where individual troubleshooting is required Reduction of overhead cost

32 32 AGENDA Analysts & Investors meeting, 16 Mar page Topic 1 Review 3 Topic 2 Overview 2012 Macro-economic development Focussing the business model Measurements to improve profitability Outlook

33 33 Capacity development Target 2012 Total seats [m] ASK [bn] Comments >-5% >-1.5% ASK development to 2012 [bn] long haul medium haul 17.4% 12.3 >+6% 62.8% 39.0 <-3% Sharp fleet reduction from 170 to 152 aircraft Capacity reduction in medium and short haul by Giving up unprofitable routes Alignment of aircraft utilization Focusing on high frequency Expansion in long haul by Increasing flights to Abu Dhabi Strengthening Berlin hub with flights to North America short haul 19.8% 10.8 <-7%

34 34 Target 2012 Topline development yield and seat load factor improvement Revenue/pax [EUR] >+5% Seat load factor [%] >+2%p. Revenue/ASK development [EUR ct] >+6.5% 78.2% Initiatives to increase yield Effect through alliances & partnerships Shape & Size 2012 Price SLF Ancillaries 2012 Increase of base fare ( Eckpreis ) to all destinations Restrictive booking class steering drive higher yields (implementation of better RMS) Increase of fuel surcharge has been established in January further increase in March Cancellation of routes helps to improve yield and seat load factor Partnerships positively impact seat load factor

35 35 Cost development excluding fuel Target 2012 Total cost and fuel [EUR] Cost / ASK development [EUR] 3,413.2 >-1% 5.49 broadly stable 1,669.4 Shape & Size Price Structure Cost development subject to USD development Direct operating cost [incl AT, excl. fuel] Personnel Other operating expenses Cost of a/c ownership Structural cost increase will occur (e.g. distribution cost) but also higher yields will be generated Shape & Size will help to offset structural cost and price increases

36 36 Cost of aircraft ownership development Target 2012 Aircraft [ #] BLH [hrs] Cost of a/c ownership [EUR m] % >-5% year end 2012 year end 2012 Shape & Size 2012 Narrow body BLH p.a. [hrs] >+5% Wide body BLH p.a. [hrs] >+7% Strongly depending on USD development ( lease rates) Next to cost reduction the increase in productivity is key for Shape & Size Revenue increase per aircraft bigger than 10%

37 Fuel hedging 2012 Fuel hedging profile and fuel price development, 2012 vs. Hedging profile [%] Price 1) development * [USD/t] , ,050 1, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hedging Rate 2012 (as of 03/14/2012) Hedging Rate (as of 03/09/) Current Hedge price Best case hedge price Worst case hedge price Market / Forward price Hedge price 1) excl. differentials * as of 14 Mar 2012 / 09 Mar 37

38 Dollar hedging 2012 Dollar hedging profile and FX rate development, 2012 vs. Hedging profile [%] FX rate development * [USD/EUR] Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1.30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hedging Rate 2012 (as of 03/14/2012) Hedging Rate (as of 03/09/) Current Hedge rate Best case hedge rate Worst case hedge rate Market / Forward rate Hedge rate * as of 14 Mar 2012 / 09 Mar 38

39 Fuel and USD sensitivity Target 2012 Fuel consumption [mt] Fuel consumption / ASK [kg] Fuel / dollar sensitivity 1.45 >-3% % Fuel price unhedged quantity [USD/t] Shape & Size Structure Fuel costs per quarter vs [EUR m] 196 >15% 277 >5% 321 >2% 255 >2% fuel fuel Unhedged price dollar [EUR/USD] Q1 Q2 Q3 Q4 Effective Fuel Price/ton = $1.081 incl. differentials [$1.013 excl. differentials]; effective EUR/USD =

40 40 Strong earning improvement envisaged Target 2012 Operational performance Capacity Strong fleet reduction (10% of aircraft) Reduction in selected nonstrategic markets in Europe Moderate increase in long haul business Capacity utilization and income Increasing load factor through network reduction, improved sales platform and partnerships Result Revenue Growth in revenue through yield and SLF growth expected ( Q1 trends were satisfactory) Expenses Cost per ASK ex fuel will be kept stable; structural cost increases will be offset through Shape & Size Result Improvement in profitability Balance sheet Balance sheet Equity and liquidity stabilized through Etihad investment Deleveraging is the key objective for 2012; initiatives are on the way A L Strong earnings improvement targeted for 2012, Shape & Size showing positive effects in the 1 st Quarter