Aer Lingus Group plc 2013 Preliminary Results 24 February 2014

Transcription

1 Aer Lingus Group plc 2013 Preliminary Results 24 February 2014

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 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. 2

3 2013 Aer Lingus preliminary results Introduction Christoph Mueller, Chief Executive Officer (CEO) 2013 Financial Review Andrew Macfarlane, Chief Financial Officer (CFO) 2013 Commercial Highlights Stephen Kavanagh, Chief Commercial Officer (CCO) Closing Comments Christoph Mueller, Chief Executive Officer (CEO) 3

4 Introduction Christoph Mueller, CEO 4

5 2013 a year of growth Total revenue up 2.3%, average fare revenue per seat up 2.0% Effective capacity management, load factor up 0.7 points to 78.4% Short haul fleet expanded by four aircraft (+11.1% in SH fleet size) to support new contract flying business Additional long haul capacity (+11.6%) fully absorbed by market Maintained short haul profitability in challenging demand conditions: Weather conditions at the start of our key trading season Heavily discounted fare offerings in the market in Q3 and Q4 Operating profit of 61.1 million in line with guidance Dividend of four cent per share proposed for 2013 and annually for the foreseeable future 5

6 2013 Financial Review Andrew Macfarlane, CFO 6

7 Note on comparative figures Long haul (7 th aircraft) 2012 United Airlines Extended Code Share 2013 Reported as Other revenue Ceased operation in Q Not included in our passenger/capacity statistics Aircraft back in our fleet, flying from Q Full year of ownership costs (maintenance, depreciation, etc.) Included in our passenger/capacity statistics Contract flying business Revenue in Other revenue Q2 to Q charged on a per block hour basis Start-up costs Q1, subsequent costs ACMI only Not included in passenger/capacity statistics Full year 2013 vs Approx. 55 million of additional revenue however Uneven quarterly impact on P&L 7

8 2013 financial highlights m Unless otherwise indicated 2013 % Change 2012 Change m Total revenue 1, % 1, Operating costs (1,364.0) (3.0%) (1,324.2) (39.8) Operating profit 61.1 (11.6%) 69.1 (8.0) Exceptional items (17.4) 34.3% (26.5) 9.1 Profit before interest, tax & share of Joint Venture % m 31 Dec 2013 % Change 31 Dec 2012 Change m Gross cash (1.2%) (11.1) Debt (477.6) 10.2% (531.6) 54.0 Net cash % Sign convention: favourable/(adverse) Tough short haul market. Effective capacity actions protected margin 8

9 2013 operating profit bridge million 1.3 (3.4) (10.7) (8.3) (6.8) (27.3) 38.1 (12.7) Profit protected by short haul capacity adjustments Operating profit Short haul revenue Long haul revenue Retail/Cargo Other (incl. contract flying and Regional franchise) Fuel Airport charges Staff costs Maintenance Depreciation Other gains/(losses) Other 2013 Operating profit Revenue Operating costs Long haul and contract flying drove revenue 2.3% higher. Operating costs higher due to 7 th aircraft, contract flying, maintenance and FX hedging 9

10 Fuel % Fuel burn Long haul ( 000 tonnes) (12.2%) Fuel burn Short haul ( 000 tonnes) % Total fuel burn ( 000 tonnes) (2.2%) Avg. price per tonne (US$) 1, (0.7%) Avg. price per tonne incl. into-plane and EU ETS (US$) 1,061 1,057 (0.4%) Total fuel cost (US$m) (2.6%) Average FX rate for period % Total fuel cost ( m) % 2012 Fuel cost Price Volume SH Volume - LH FX 2013 Fuel cost (358.6) (1.3) 6.4 (14.2) 10.4 (357.3) Sign convention: favourable/(adverse) Volume increase offset by favourable FX 10

11 2013 Airport Charges and Staff Costs Airport charges up 3.4 million (0.7) Price increases mainly LHR, Italy, Spain 10.0 (4.1) (1.8) Additional long haul offset by reduced short haul volumes Favourable FX (EUR/GBP and EUR/US$) 2012 Airport Charges Price Volume FX Other 2013 Airport Charges Staff costs up 10.7 million 1.0 Pilot and cabin FTEs higher due to contract flying and 7 th aircraft Minimal savings in 2013 from Voluntary Severance Programme. 119 staff had left as at 31 December 2013 employment cost of approx. 5.0 million 2012 Staff Costs Contract flying/7th aircraft Pay increases 2013 Staff Costs 11

12 2013 Maintenance and Depreciation Costs Maintenance charges up 8.3 million (3.7) Four extra short haul and one extra long haul aircraft Maintenance 7.9 Contract flying/7th aircraft Heavy maintenance 68.4 De-icing Other 2013 Maintenance Higher de-icing and maintenance programme spend than 2012 Other mainly reflects movements on engine provisioning Depreciation up 6.8 million 2.3 7th aircraft driving increase A320 held for sale in 2012, back in fleet and depreciated in Other costs include premises, capitalised maintenance and IT 2012 Depreciation 7th aircraft A320 held for sale (2012) Other 2013 Depreciation 12

13 Average US$/EUR FX rate Other gains/(losses) - 'million 2013 Other Gains/(Losses) Other gains down 12.7 million Total other gains/(losses) Average hedged rate - US$/EUR Average actual rate - US$/EUR Gains from FX hedging programme reduce as hedge rate closes in on market/spot rate Spread between average hedged rate and average actual rate for US$/EUR in 2013 was $0.02 compared with $0.10 in 2012 Lower other gains for 2013 had been guided in the prior year 2014 US$179m hedged at average rate of

14 Exceptional costs Restructuring provisions & other costs (4.3) (17.5) 2013 Voluntary Severance Programme (8.9) - Professional & legal fees (Ryanair bid defence, pension etc) (6.1) (9.8) Gain on sale of engine net of writedowns/impairments 1.9 (4.0) Release of impairment provision Total charge (17.4) (26.5) 119 staff with full year employment cost of approx. 5.0 million have exited the company as at 31 December 2013 under Voluntary Severance Programme 2012 restructuring includes costs of Shannon maintenance relocation 14

15 Free cash flow million (7.4) (1.1) 82.9 (31.4) (4.5) (1.7) Profit before tax Depreciation Provisions Working Capital Net Capex Net interest paid Other (incl. exceptionals) Free cash flow (FCF) Net capital expenditure in 2013 relates to aircraft engines, capitalised aircraft maintenance, facility upgrades and other equipment costs 2014 capital expenditure around 60 million major IT investment Strong free cash flow generation in

16 Debt Cash Balance Sheet Gross Cash and Gross Debt (47.0) (21.2) (12.3) Net cash 31 Dec 12: million 31 Dec 13: million (10.7) Gross cash 31 December 2012 FCF Interest accrued Debt repaid Dividend FX Investment in JV Gross cash 31 December 2013 (531.6) (477.6) (5.1) Debt repayments 2014: 114 million 2015: 84 million Gross debt 31 December 2012 Interest accrued Debt repaid FX Gross debt 31 December

17 2013 Commercial Highlights Stephen Kavanagh (CCO) 17

18 2013 Commercial Highlights % Change yr on yr Passengers (m)* (0.3%) Load factor * 78.4% 77.7% 0.7 pts Seats (m) * (1.0%) ASKs (m) * 18, , % Total passenger fare revenue ( m) 1, , % Fare revenue per seat ( ) % Fare revenue per seat at constant currency ( ) % RASK ( cent) (0.2%) * Excludes Aer Lingus Regional services operated by Aer Arann, contract flying operations and the Washington Dulles Madrid code share service operated in partnership with United Airlines in

19 2013 Short haul performance Total passenger numbers (including Regional) in line with prior year at 9.6m Mainline capacity reduced in direct response to demand conditions Load factor increased by 0.2 points to 75.6% Positive RASK performance +0.8% Fare revenue per seat of (-1.2%) reflected challenging peak demand environment, Q4 price competition and currency headwind of 8.1m Frequency build-out at central airport maintained 19

20 2013 Long haul performance Fare revenue growth of +11.1% to 381.6m Total passenger numbers grew by 12.2% to 1.1m Profitable capacity growth and frequency build with addition of a 7 th A330 Load factor increased by 0.6 points to 83.1% Fare revenue per seat static at Growth achieved in all sources of connecting traffic ex-europe and North America Well positioned for continued growth in 2014 with introduction of three B757s 20

21 2013 Retail highlights Revenue growth of 2.8% to 181.5m 3.1% increase in average spend despite change in short / long haul passenger ratio Short haul per passenger Long haul 9.92 per passenger Increased attachment rates in seat selection and bundled fares driving growth New product initiatives included launch of preorder meal and Heathrow Express Refresh of existing product categories Check baggage fees Car hire In-flight menu Distribution initiatives to focus on increased reach and conversion for Retail revenue ( 'm) Retail revenue per passenger

22 Closing Comments Christoph Mueller (CEO) 22

23 A look forward to 2014 Ambitious long haul expansion planned through damp lease of three Boeing 757 aircraft (seat capacity +20%) Forward bookings currently ahead of prior year with new services performing in line with expectations Full US Customs and Border Pre-clearance secured for Summer 2014 schedule Q1 trading may be behind prior year (March to be impacted by timing of Easter) but we expect 2014 operating profit to be broadly in line with performance could have been better. In 2014, our focus will be on: 1) Reducing our costs; 2) Improving our product/service; and 3) Selling the additional long haul capacity deployed Cost Optimisation and Revenue Excellence CORE 23

24 New business improvement programme CORE Changes in our market Increased competition in short haul Other competitors moving towards the value carrier model Need to maintain our differentiation Need cost base to allow us to be price competitive Held back in 2013 by lack of resolution of pensions issue, but now need to make progress CORE is a two year programme Objective of CORE is profitable growth: Realise our potential Fine tune our business model Control our destiny Reduce our costs 24

25 CORE has three main elements Revenue excellence Merchandising and retail revenue Delivering the customer journey of the future Next step in B2C distribution = new reservation system Cost and business optimisation Simplify and improve airline processes for the benefit of the customer Transform support functions Headcount reductions and productivity gains Total cost reduction target of 30 million Our people Further improvements in staff engagement, training, flexibility and productivity 25

26 Product/Service improvements in 2014 and beyond New Toronto route April 2014 Aerlingus.com redesign New mobile app Q Q New San Francisco route Heathrow Terminal 2 April 2014 July 2014 Business class improvement Q

27 Q&A 27

28 Appendix A Q financial highlights m Unless otherwise indicated Q Q Change %¹ Revenue Passenger revenue (5.2%) Retail revenue (0.8%) Cargo revenue (5.8%) Other % Total revenue (1.7%) Operating costs Fuel (78.0) (83.8) 6.9% Staff costs (67.4) (65.2) (3.4%) Airport charges (67.1) (66.6) (0.8%) Other operating costs (105.8) (108.0) 2.0% Total operating costs (318.3) (323.6) 1.6% Operating profit before net exceptional items (17.4) (17.4) 0.0% ¹ Sign convention: favourable/ (adverse) 28

29 Appendix B - Fuel hedging as at 31 December 2013 Estimated fuel burn and hedge price Q Forecast Q Forecast Q Forecast Q Forecast 2014 Forecast Estimated burn ( 000 tonnes) % hedged 87% 70% 55% 41% 61% Avg. hedged US$ price / MT Forward fuel price as at 31 December 2013 and at 19 February 2014 Jet CiF NWE (US$/MT) 1,100 Historic Price Forward Curve as at 31st December 2013 Forward Curve as at 19th February ,070 1,040 1,

30 Contact Aer Lingus For further information please visit or contact: Investors & analysts Declan Murphy Jonathan Neilan Aer Lingus Group plc FTI Consulting Tel: Tel: Declan.Murphy@aerlingus.com Jonathan.Neilan@fticonsulting.com Irish Media Declan Kearney Sheila Gahan Aer Lingus Group plc Wilson Hartnell Public Relations Tel: Tel: DeclanP.Kearney@aerlingus.com Sheila.Gahan@ogilvy.com International Media Matthew Fletcher/Victoria Palmer-Moore Powerscourt Tel: Matthew.Fletcher@powerscourt-group.com; Victoria.Palmer-Moore@powerscourt-group.com 30