2012 Preliminary Results. 6 February 2013

Transcription

1 2012 Preliminary Results 6 February 2013

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. 2

3 Positive trends across key performance metrics Profitability Cash flow Margin Balance sheet Asset utilization Punctuality Customers Competitors Shareholders 2012 operating profit of 69.1m; up 20.0m (+40.7%) on 2011 Operating free cash flow of 75.2m; 5.4% of turnover 5.0% op. margin can accommodate ALL investments in the years to come Cash up to 908.5m (+1.5%) and debt reduced to 531.6m (-7.9%) Passenger load factors up to 77.7% (+2.1pts) Now more punctual than Southwest, the inventor of fast turnarounds Ranked no. 4 of 16 in Europe for customer service* Gained market share in both long and short haul from LCCs, legacy, regional & charter carriers. This business model works, even in a recession Value creation and distribution; 2011 dividend: 3 cents; 2012: 4 cents * Which? magazine members airlines survey, January

4 Introduction to 2012 Aer Lingus preliminary results 2012 Financial Review Andrew Macfarlane, Chief Financial Officer 2012 Commercial Highlights Stephen Kavanagh, Chief Commercial Officer CEO Comments Christoph Mueller, Chief Executive Officer Our business model works Shareholder value delivered Growth plan in place 4

5 2012 Financial Review Andrew Macfarlane, CFO 5

6 2012 financial highlights m Unless otherwise indicated Change % Total revenue 1, , % Operating profit/(loss) (before exceptional items) % Margin % 5.0% 3.8% 1.2pts Exceptional items (26.5) 37.2 N/A Profit/(loss) before tax (51.9%) ASKs (million) 18,685 18, % m 31 Dec Dec 2011 Change % Gross cash Up 1.5% Debt Down 7.9% Operating profit up 40.7%; strong balance sheet 6

7 Strong operating result 2012 operating profit bridge ( m) before exceptional items 13.1 LH SH LH 18 (69.9) SH 0.6 LH 30.3 SH 30.1 (19.7) (7.6) Operating Profit Yield Seat load factor Seat capacity Other revenue Fuel Airport charges Staff Other Other 2012 Operating gains/(losses) Profit Revenue Cost Strong revenue performance more than offsets fuel and airport charge increases 7

8 Fuel price inflation a significant cost challenge in 2012 Fuel analysis Full year 2012 Full year 2011 % Fuel burn ( 000 tonnes) % Avg. price per tonne (US$) % Avg. price per tonne incl. into-plane (US$) 1, % Total fuel cost (US$m) % Average FX rate for period % Total fuel cost ( m) % Fuel price inflation and a stronger US$ combined to cause a significant increase in fuel costs 8

9 Fuel hedging as at 31 December 2012 Fuel Q Forecast Q Forecast Q Forecast Q Forecast 2013 Forecast Estimated burn ( 000 tonnes) % hedged 80% 65% 51% 36% 57% Avg. hedged US$ price / MT 1,011 1, Forward fuel price as at 31 December 2012 and at 31 January ,100 1,070 1,040 1, Historic Price Forward Curve as at 31 Dec'12 Forward Curve as at 31 Jan'13 Platts Jet CIF NWE (US$/MT) 9

10 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Average USD$/EUR Rate Other gains/losses US$ hedging m Other gains Driver of Other gains/losses 1.50 US$/EUR FX Rate January 2010 to December Avg actual US$/EUR rate Avg hedged USD$/EUR Avg forward US$/EUR rate USD$/EUR FX rate Forward USD$/EUR FX rate Average US$/EUR rate for The year At 31 December 2012, US$132 million of the expected 2013 US$ trading requirement was hedged at an average rate of US$

11 Airport charges in 2012 Airport charge variance analysis - m Top 10 stations 2012 and m (1.8) airport charges Price Volume FX Other 2012 airport charges DUB airport charges 2012 V m LHR airport charges 2012 V m (1.9) DUB charges Price Volume Other 2012 DUB charges 2011 LHR charges Price Volume FX Other 2012 LHR charges On a steady state basis, price increases will add approx 15m to cost in

12 Greenfield savings over-achieved 97.0m 97.0m 104.2m m m Total Greenfield targetted savings (original plan 2009) Revised February exit run rate New savings achieved 2012 Staff Non Staff Other Annual value of savings at December 12 Target of 97 million exceeded. Remain committed to achieving continued cost reduction 12

13 Exceptional costs Exceptional credits/(charges) - m Restructuring provisions (incl. Greenfield) (17.2) 3.1 Advisory fees related to Ryanair Offer (9.9) - Asset impairments (incl. A320 held for sale) (3.9) - Release of impairment provision 4.8 Gain on surrender of head office site lease 21.0 Reclassification of cash flow hedges Loss on disposal of property, plant & equipment - (2.2) Other (0.3) 3.7 Total (charge)/credit (26.5) 37.2 Restructuring provisions in 2012 are costs associated with the closure of hangar maintenance at Shannon and Greenfield 13

14 Strong cash generation in 2012 million 3.1 (22.0) 79.5 (41.1) (2.2) Profit before tax Depreciation Provisions Working capital Net capex Net interest paid Other (incl exceptional items) Free cash flow (FCF) Net capital expenditure in 2012 relates primarily to A330 engine purchase, capitalised aircraft maintenance, facility upgrades and other equipment costs Free cash flow represents cash generated from operating activities less net capital expenditure (purchases of fixed assets exclusive of finance lease raised less proceeds from disposals) plus or minus net interest received/paid Strong cash generation in

15 Strong balance sheet Gross cash December 2011 Free cashflow Interest accrued Debt repaid Dividend Investment in JV FX Gross cash December 2012 Gross Cash m (45.2) (16.0) (2.5) (5.5) (577.2) Debt repayments 2013: 42 million 2014: 118 million 5.5 (531.6) Debt m (5.1) 45.2 Gross debt December 2011 Interest accrued Debt repaid FX Gross debt December 2012 Gross cash increased by 13.7 million, debt reduced by 45.6 million, all debt is aircraft related 15

16 2012 Commercial Highlights Stephen Kavanagh (CCO) 16

17 Commercial highlights Revenue component m m increase yr on yr % Change yr on yr 83% Passenger revenue 1, % 13% Retail revenue % 3% Cargo revenue % 1% Other revenue % Total revenue 1,393.3m % Strong revenue growth across the business 17

18 Passenger and market share development Passenger development 10.8m passengers flown in 2012 on all services including: Aer Lingus Regional Washington Dulles Madrid codeshare with United Airlines Highest ever number of passengers flown on Aer Lingus services in a single year +3.9% +5.1% Passengers ('m) Market share development DUB London Traffic Ex-Ireland TA Traffic Total Ex-Ireland Traffic 45% 46% 49% 53% 41% 43% 38% 39% Aer Lingus market share (incl Regional) % Source: DAA, CAA figures Aer Lingus market share (%) Aer Lingus market share (%) Aer Lingus market share (incl Regional) % 18

19 Short haul performance Demand led capacity deployment Continuous investment in frequency and schedule quality creating choice for customers Price and volume both contributing to growth in revenue per seat Capacity (ASKs in millions) Customers (thousands) Fare yield per seat ( ) 12, % 12,464 8, % 8, % Strategy of carefully managing capacity deployment and focusing on maximising yield per seat is delivering positive results 19

20 Long haul performance Partnership and connectivity continuing to play key role in growing passenger volume Excellent load factor (82.5%) performance combined with effective pricing driving fare yield per seat Business cabin continues to perform strongly, accounting for 22% of LH revenue in 2012 Capacity (ASKs in millions) Customers (thousands) Fare yield per seat ( ) +2.3% +9.1% 6,221 6, % Strategy of carefully managing capacity deployment and focusing on maximising yield per seat is delivering positive results 20

21 Retail revenue euro % Change Retail revenue per passenger % Product launch - Fare family (low, plus and flex) - Sky Deli Menu - Choice Seats on Long haul Opportunity enabled by seat assignment Continuous investment - Pre-order meals on long haul and short haul - New Business lounge at Boston - Wi-Fi rollout from Q on long haul, short haul fit out to commence in Q Online / mobile channel development to optimise Retail product sales Ongoing investment in retail revenue generating positive results 21

22 Cost effective network extension through partnerships Growth % Interline flown passenger volumes 1,2 ( 000) % Aer Lingus Regional passengers ( 000) 1, % ¹Inclusive of short haul and long haul flows from our interline partners. 2 Excludes EI Regional Traffic ¹Inclusive of short haul and long haul flows from our interline partners. 2 Excludes EI Regional Traffic Increased code-share with United Airlines New partnership, code-share with Etihad Airways Move to jetblue Terminal 5 at New York Open architecture approach delivering growth 22

23 Our commercial strategy continues to create value 23

24 CEO Comments Christoph Mueller, CEO 24

25 Future growth plans Our value carrier business model works even in a recession! The business has been stabilised and returned to profitability The next phase of our plan is to deliver sustainable growth for our shareholder Growth will be achieved through three main business components: 1 Aer Lingus Mainline 2 Aer Lingus Regional 3 New business ventures/ white label flying 25

26 Aer Lingus mainline The classic Aer Lingus connecting Ireland with the World Transatlantic Partnerships Strengthening Dublin as Hub for superior North Atlantic connections. All main gateways with at least 2 daily flights. 15 % capacity growth in 2013 supported by code share agreements and improved connectivity at both ends. US customs pre-clearance at Dublin and Shannon provides significant competitive advantage Neutrality from three major alliances is key, our focus is on travel patterns of our 70 million customer base of Irish Diaspora Ability to open up selectively a range of additional routes and destinations in all important regions Selection of partners is minimum equal or even superior to own service offering; the product is accepted Network Reach New summer schedule 2013 has triggered the strongest revenue bookings in our history for consecutive days in January 2013 New Summer schedule 2013 is attractive to partners and has caused multiple code share/interline requests. 26

27 Aer Lingus mainline (continued) LHR Terminal 2 (STAR) JFK Terminal 5 (jetblue) Move to New Terminal 2 (Star Alliance and Virgin) at London Heathrow Now modern state of the art terminals in Dublin, London and New York Seamless transfers to all partnering airlines in the same terminal Aer Lingus regarded partner due to hands on approach and pragmatism Ancillary revenue Developing new markets Fare revenue increases will always reach a ceiling as a function of fuel Ancillary revenues main growth area in the industry: Aer Lingus in top 10 Aer Lingus approach honest: tangible value for money rather than rip off Recent successes with fare family and sky deli 2013/14: total fleet will be wifi, pre-order meals, attractive retail Continue to compensate for weakness in key Irish and UK markets Gains already achieved with 60% of long haul bookings now sourced in US, 47% of all bookings now sourced outside Ireland Aer Lingus only online network carrier in Europe with rapidly increasing brand recognition Irish brand and lifestyle has international resonance and acceptance 27

28 Aer Lingus Regional Over 1 million passengers carried in 2012; an 33.3% increase on 2011 The particular benefits of the Regional model are: Allows us to profitably service lower capacity routes while maintaining high frequency Using Aer Arann turbo-prop aircraft as fuel efficient tool to keep the prices low Franchise fee is equivalent substitute to short haul margin; creates the right incentives on both sides Important source of passenger feed for transatlantic services; it is just faster to the USA 10 year extension of franchise agreement reflects importance of Regional services to the Aer Lingus business Aer Lingus is investing in the business model: Not as a shareholder in the airline to avoid cost creep But as an asset owner in a joint venture with Aer Arann shareholders 28

29 New business ventures/ white label flying Virgin Atlantic wet lease agreement presents profitable opportunity to increase our production base with positive effects on overall unit costs ACMI (i.e. aircraft, crew, maintenance and insurance), other commercial agreements (franchise, JVs) also possible within the same platform In this case, we combine: Cost efficiencies of our established UK production platform Capability and knowledge of experienced operator (highest punctuality and baggage delivery in London Heathrow) Low risk entry into a very complex market Wet lease of an Airbus for three consecutive winter seasons Operation of a long haul aircraft from Europe to various Caribbean destinations on behalf of a major European Tour Operator to fill our winter low. Substantial contribution to our margin due to higher capacity utilisation We will disclose details in due course 29

30 Q&A 30

31 Appendix A modelling guidance FY 2013 Development Termination of ECS and redeployment of A330 in our long haul services for Summer 2013 Key financial considerations The overall bottom line impact is expected to be marginally positive year-onyear Virgin Atlantic wet lease agreement Four A320 aircraft - costs will impact each relevant profit and loss line. Revenues will be other income will absorb setup costs Similar margin to short haul operations over the life of the contract Aircraft leasing vehicle investment Attractive return on equity over the life of the Joint Venture Returns will increase as aircraft are delivered over 2013 and 2014 Effect on 2013 small Airport charges On a steady state basis (i.e. assuming the same passenger/movement volumes as 2012), price increases, mainly at Dublin, London Heathrow, Spanish and Italian airports, will add approximately 15 million to costs in

32 Appendix B - Q4 financial highlights m Unless otherwise indicated Q Q Change %¹ Revenue Passenger revenue % Retail revenue % Cargo revenue % Other (53.9%) Total revenue % Operating costs Fuel % Staff costs % Airport chares % Other operating costs % Total operating costs % Operating loss before net exceptional items (17.4) (17.6) 1.1% Exceptional items (1.7) 22.4 NM 2 Operating loss after net exceptional items (19.1) 4.8 NM 2 ¹ Sign convention: favourable/ (adverse) 2 Not meaningful 32