Monthly Archives: August 2014

Ukraine Air Alliance Antonov An-12 crashes in Algeria, 7 killed

Ukraine Air Alliance An-12 UR-DWF (Grd) LGG (RBX)(LRW)

Ukraine Air Alliance (Kiev) Antonov An-12BK registered as UR-DWF (msn 8345802) (above) operating a cargo flight from Prestwick, Scotland to Malabo, Equatorial Guinea crashed on takeoff from Tamanrasset, Algeria yesterday (August 30) after making a fuel stop. All 7 crew members on board were reported to have died in the crash.

According to Wikipedia the airline was established on February 18, 1992 and started operations in 1993.

Read the full report from CNN: CLICK HERE

Copyright Photo: Rainer Bexten/AirlinersGallery.com. UR-DWF is pictured at Liege before the crash.

 

 

JOTA Aviation acquires its first BAe 146 for charters

JOTA Aviation (Southend) has acquired its first BAe 146. Previously the company operated King Air 90s for ad hoc passenger and cargo charter flights.

The new BAE 146-200 is pictured arriving at Southend from Manston. Manston is being closed.

This could well be the last commercial aircraft to depart from Manston unless the African DC-8 does fly out as per the photo of mine you kindly used.

This airliner was delivered to Pacific Southwest in 1985 as N364PS and was last operated by Flightline as G-OZRH and stored at Southend. It then became N880PA and flew to Manston in February 2013.

The aircraft has now been re-registered as G-SMLA (msn E2047) recently.

Copyright Photo: Keith Burton/AirlinersGallery.com. G-SMLA arrives at the Southend base.

Flydubai adds three more routes, reaches 80 destinations

Flydubai (Dubai) has announced the addition of three new east African routes, bringing the total number of destinations in the carrier’s network to 80. With the launch of flights in September 2014 to Bujumbura in Burundi, Entebbe in Uganda and Kigali in Rwanda, Flydubai will fly to nine destinations in Africa.

In addition to operating between Dubai and these three new cities, Flydubai has obtained the rights to carry passengers between Uganda and Burundi.

Rwanda and Burundi are home to some of the most biodiverse places. Filled with numerous volcanoes, nature reserves and the second deepest lake in the world, the two countries also have one third of the world’s remaining Mountain Gorillas and one third of Africa’s bird species. While tourism is the largest contributor to Rwanda and Burundi’s economies, Uganda is considered one of Africa’s most progressive economies and is emerging as one of the leading commercial centres within Africa.

Within Africa, Flydubai currently operates flights to Alexandria in Egypt, Khartoum and Port Sudan in Sudan, Juba in South Sudan, Ethiopia’s Addis Ababa as well as Djibouti’s capital Djibouti.

Flydubai will operate seven flights a week between Entebbe and Dubai starting from September 28, 2014.

Flydubai will operate two flights a week between Bujumbura and Dubai via Entebbe starting from September 30, 2014.

Flydubai will operate two flights a week between Entebbe and Bujumbura starting from September 30, 2014.

Flydubai will operate three flights a week between Kigali and Dubai via Entebbe starting from September 27, 2014.

Copyright Photo: Paul Denton/AirlinersGallery.com. Boeing 737-8KN A6-FDN (msn 40241) approaches the runway at Dubai International Airport (DXB).

Flydubai: AG Slide Show

Expanded route map: Flydubai 8.2014 Route Map

 

Flights MH 370 and MH 17 continue to impact Malaysia Airlines, second quarter loss grows

Malaysia Airlines (Kuala Lumpur) reported a larger second quarter net loss of RM307 million ($97.4 million) for the three months ended June 30, 2014.

The company continues to suffer as a result of the March 8, 2014 disappearance of flight MH 370 and the shooting down of flight MH17 on July 17, 2014.

Here is the complete financial statement by the company:

The disappearance of Malaysia Airlines flight MH 370 in March 2014 continued to impact the airline’s second quarter financial results with Malaysia Airlines’ reporting a net loss of RM307 million for the three months ended June 30, 2014. Adding to the earlier loss of RM443 million in first quarter, the national carrier’s first half 2014 results stood at a loss of RM750 million, 65% more than the previous corresponding period in 2013.

For the three months ended June 2014, Group revenue fell 5% to RM3.59 billion compared to one year ago as a result of lower yield and seat factor following the MH 370 tragedy. The lower revenue coupled with a marginal 2% increase in cost, principally due to fuel cost for the quarter, resulted in a net loss After Tax of RM307 million after taking into consideration depreciation (RM223 million), finance costs (RM119 million) and unrealized forex gains (RM52 million).

Having lost substantial potential revenue from the popular MATTA Fair in early March and the decision by MAS to impose a deliberate advertising black-out in March and April due to the tragedy of MH 370, more aggressive marketing activities picked up in May and June.

The market responded positively to the Malaysia Airlines Travel Fair (MATF) held in May which saw sales increase 29% and higher than average daily sales compared to previous fairs that ran earlier in the year. MATTA Sabah, MATF Penang plus a greater push in all markets around the world further helped sales and restored confidence in MAS.

Seat factor which fell 9.5 points in May to 68.9% was seen to pick up in June to return to above the 80% levels again.

For the second quarter 2014, capacity rose 9% year-on-year based on improved aircraft utilization; however traffic remained the same year-on-year. Consequently, the airline’s seat factor recorded a fall of 6.7 points for the Quarter to 73.7% compared to 80.4% in the previous year. Malaysia Airlines carried 4.2 million passengers in the months of April to June 2014.

Fuel expenditure in second quarter 2014 rose 10% to RM1.53 billion compared with the previous corresponding period due to a rise in fuel price and weakening of the Ringgit against the US Dollar.

In an effort to reduce fuel costs and increase productivity, Malaysia Airlines brought forward the retirement of its older Boeing 737-400 fleet from end 2014 to mid-June. As at mid-August, the Group’s fleet comprised 127 aircraft. Of this, Malaysia Airlines’ operates 88 aircraft, which includes 54 Boeing 737-800s, 15 Airbus A330s and 6 Airbus A380s. The average age of the fleet for the Group as at June 30, 2014 is 5.28 years.

For the first half of 2014, total revenue fell 2%, however total expenditure grew 4%. Fuel costs, representing 43% of total expenditure, was 12% higher. Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) stood at negative RM134 million for the first half of 2014 against a positive RM258 million in the same period one year ago. Depreciation charges (RM460 million) and finance costs (RM241 million) continued to remain high.

Despite increases in capacity and revenue as well as cost saving measures and productivity improvements, the Group has continued to report weak financial performance.

The weak financial performance has made Malaysia Airlines acutely aware of the need to restructure the Company’s operations, even prior to the double tragedies of MH 370 and MH 17. The occurrence of the two incidences within a short span of 4 months served to worsen the situation further.

“We operate in a harsh business environment of stiff competition from regional and global carriers and high operational costs. Coupled with the impact of the two tragedies which have damaged our brand, the need to restructure the Company was accelerated. The full financial impact of the double tragedies of MH 370 and MH 17 is expected to hit Malaysia Airlines in the second half of the year”, said Ahmad Jauhari.

“Our Company has had to undergo a thorough re-examination and re-evaluation in order to reposition ourselves as a stronger and more sustainable Malaysia Airlines for the future”, said Ahmad Jauhari.

On August 8, 2014, majority shareholder, Khazanah Nasional Berhad, announced its intention to take full ownership of Malaysia Airlines and delist it from Bursa Malaysia. If approved, it will put into action a plan to restructure the airline group towards returning it to profitability.

Yesterday (August 29) the airline issued this statement about the recovery plan for the national airline:

The Board of Malaysia Airlines welcomed the release by Khazanah Nasional Berhad (“Khazanah”), its majority shareholder, of “Rebuilding a National Icon: The MAS Recovery Plan” – a plan to facilitate the airline’s achievement of sustained profitability and competitiveness. It also acknowledged receipt of a letter from Khazanah relating to Khazanah’s planned investment in MAS to facilitate its delisting from the main market of Bursa Malaysia and restructuring, and the terms of such funding.

At its last Annual General meeting on June 25, Chairman of MAS, Tan Sri Md Nor Yusof, and Managing Director and Group Chief Executive Officer, Ahmad Jauhari Yahya, made clear that even before the disappearance of MH370, radical change was already firmly on the Board’s agenda. The urgency for change, evident through our continued poor performance, was also accelerated by the loss of MH 17.

The publication of the Recovery Plan follows the formal request by Khazanah to the MAS Board of Directors to undertake a Selective Capital Reduction (“SCR”) exercise made on August 8, 2014. The SCR will be put to shareholders’ vote at an Extraordinary General Meeting to be convened in due course.

In parallel, MAS’ senior leaders have been engaging with almost 2,500 staff at multiple locations across the Group, to hear their views and concerns resulting from plans to take the Company private and restructure.

We, together with representatives of the employees’ unions, met this morning with Khazanah. We will continue this process of engagement with all parties including directly with employees and with representatives of the employees’ unions.

In the meantime, there will be no disruption to our current service. We will continue to fly, honor existing reservations, and plan future travel. The announcement on August 8 and this Plan will have no impact on the current fares we offer our customers and corporate accounts nor our membership in the oneworld alliance.

We are an award winning airline– including having won World’s Best Cabin Crew numerous times. It is our duty and honour to serve and we will continue to do so with pride and care.

In his foreword to the Recovery Plan, the Prime Minister called on Malaysia Airlines, all those who work with Malaysia’s national carrier and all Malaysians to play their part in ensuring today’s Plan becomes an enduring success. We look forward to playing our role and being a part of this effort to ensure that Malaysia Airlines becomes a profitable and sustainable national carrier of which all Malaysians can be truly proud.

Copyright Photo: Ole Simon/AirlinersGallery.com. Malaysia Airlines retired its last Boeing 737-400 in mid-June 2014. Boeing 737-4H6 9M-MMA (msn 26443) arrives in Singapore.

Malaysia Airlines: AG Slide Show

9 air takes delivery of its first Boeing 737-800, preparing to start operations

9 air (9air.com) (Nine Star Airways) (Guangzhou and Bangkok) as we previously reported is a new budget airline in China. On August 27 the new company took delivery of its first Boeing 737-800, the pictured 737-8GP B-1715 (msn 39819). The company hopes to launch scheduled passenger operations next month when a second aircraft is delivered.

According to Reuters, 9 Air finalized its order for 50 Boeing 737 jets, becoming the second Chinese carrier which operates an all-Boeing fleet.

The order includes a mix of Boeing Next-Generation 737 jets and 737 MAX aircraft.

9 air is owned by privately held Juneyao Airlines which is an Airbus A320 operator.

Nine Star Airways also intends to operate Airbus A320s from Bangkok.

Copyright Photo: Ivan K. Nishimura/Blue Wave Group/AirlinersGallery.com. B-1715 passes through Honolulu. B-1715 is one of three 737-800s leased from Transportation Partners (Lion Air) which are being leased in order to start operations.

 

Xiamen Air takes delivery of its first Boeing 787 Dreamliner

Boeing (Chicago and Seattle) and Xiamen Airlines (Xiamen Air) (Xiamen) yesterday (August 29) celebrated the delivery of the airline’s first 787 Dreamliner.

With the delivery of its first 787-8, Xiamen Airlines becomes the third Chinese airline to operate the 787. The airline will use the 787 on long-haul routes from its Fujian province base to Europe, North America and Australia.

Formed in 1984 as China’s first joint venture between the Civil Aviation Administration of China (CAAC) and a municipal government, Xiamen Airlines started services in 1985 with two Boeing 737-200s serving three cities. The carrier has grown into China’s sixth largest airline serving 218 domestic routes and 26 international and regional routes.

As part of Xiamen Airlines’ 12th five-year plan ending 2015, the carrier plans to grow its fleet to 150 airplanes, including six 787s. The 787 is the most advanced airplane in commercial aviation and will help Xiamen Airlines develop more point-to-point routes globally, while also establishing the airline as an emerging force in the commercial aviation market.

To support Xiamen Airlines’ 787, Boeing will provide a comprehensive suite of support and services that includes flight training, Airplane Health Management, electronic charts and navigation data, and Maintenance Performance Toolbox through its Commercial Aviation Services business.

Xiamen Airlines is China’s only all-Boeing carrier. In November 2013, the airline took delivery of its 100th Boeing airplane, a Next-Generation 737-800. Xiamen Airlines has a total of six 787s on order.

Copyright Photo: Bernie Leighton/AirlinersGallery.com. Boeing 787-8 B-2768 (msn 41538) is pictured at Paine Field near Everett, WA.

Xiamen Air: AG Slide Show

American and Orbitz make up, all is good again

Orbitz Worldwide has announced that it had reached an agreement with American Airlines (Dallas/Fort Worth) to continue to offer American Airlines and US Airways flights on all of its sites. Consumers should see all available flights immediately. All tickets previously purchased on Orbitz Worldwide sites remain valid.

“We are pleased that our long-standing relationship with American Airlines allowed us to quickly resolve business matters and that we continue to offer a broad range of options, including American Airlines
and US Airways flights, to the millions of shoppers who book travel on our global sites each day,” said Sam Fulton, president of Orbitz.com.

Copyright Photo: Jay Selman/AirlinersGallery.com. Boeing 777-323 ER N723AN (msn 33125) of American Airlines completes its final approach to the runway at John F. Kennedy International Airport in New York.

American Airlines (current): AG Slide Show

Alitalia to phase out the Air One brand on October 1

Air One (Milan-Malpensa) will disappear as an airline and a brand on October 1. Parent Alitalia (2nd) (Rome) has decided to streamline its operations under one name and will retire the Air One brand on this date.

Air One commenced operations on November 23, 1995. On January 13, 2009, Air One officially became part of Alitalia Group with the intent to merge the two airlines. Air One in the meantime was rebranded as Air One “Smart Carrier”, Alitalia’s lower-cost subsidiary, operating a fleet of nine Airbus A320-200s to 35 destinations in 12 countries.

All Air One routes from Catania, Palermo and Venice will cease to operate on September 30, 2014 while all remaining services from Milan (Malpensa), Verona and Pisa will be dropped on October 30, 2014.

Copyright Photo: TMK Photography/AirlinersGallery.com. Airbus A320-216 EI-DSW (msn 3609) taxies at Amsterdam.

Air One: AG Slide Show

Alitalia (2nd): AG Slide Show

Air One logo

Current routes from Venice:

Air One 8.2014 Venice Route Map

 

 

Virgin Australia CEO: “The 2014 Financial Year has seen one of the most difficult operating environments in the history of Australian aviation”, loses $332.2 million in its fiscal year

Virgin Australia Holdings Limited (Virgin Australia Airlines) (Brisbane) reported a Statutory Loss after Tax of A$355.6 million ($332.2 million) including the impact of equity accounted investments. Financial performance for the 2014 Financial Year was impacted by the confluence of excess market capacity, weak consumer sentiment, continued economic uncertainty and the $51.6 million cost of the carbon tax.

Virgin Australia Chief Executive Officer John Borghetti said: “The 2014 Financial Year has seen one of the most difficult operating environments in the history of Australian aviation.

“While the Virgin Australia Group performed well in attracting high yielding passengers and containing cost growth over the full year, underlying revenue performance was impacted by the challenging operating conditions.

“Notwithstanding these conditions, it was important for the Virgin Australia Group to complete the Game Change Program strategy and strengthen our balance sheet in order to deliver sustainable returns for shareholders over the long-term.

“Over the 2014 Financial Year, the Group further increased revenue from the Corporate and Government market segment, which now represents over 25 per cent of our domestic revenue, far exceeding our original goal of 20 per cent.

“Furthermore, our success in integrating the Skywest8 business has enabled us to significantly grow revenue from the Charter segment, increasing comparative revenue by around 30 per cent on the 2013 Financial Year. We have also positioned our loyalty program Velocity Frequent Flyer as a significant value driver for the Group, with the highest annual membership acquisition in the program’s history and a significant increase in member engagement.

“The Group’s cost program delivered a significant reduction in cost growth over the second half of the 2014 Financial Year, with growth in Cost per Available Seat Kilometre (Underlying CASK)9 including fuel and foreign exchange halving to approximately 2 per cent – a strong performance given we had lower capacity growth and we continue to invest in product and service initiatives for our customers.

“As a result of several major balance sheet initiatives executed during the year, the Virgin Australia Group finished the year with a total cash position of $783.8 million and an unrestricted cash position of $541.0 million.

“Virgin Australia also re-entered the Australian domestic budget market through the acquisition of a 60 per cent interest in Tigerair Australia at the beginning of the 2014 Financial Year. Over the last 12 months Virgin Australia has worked with Tiger Airways Holdings Limited and Tigerair Australia to overhaul revenue and accounting systems, develop the management team, improve asset utilisation and enhance the operational platform. Tigerair Australia’s performance needs to be viewed in the context of overall industry performance and weak consumer sentiment, particularly in the last quarter of the year, which has a more pronounced impact on low cost carriers. As a result of progress made during the 2014 Financial Year, and in particular marked increases in customer satisfaction, Tigerair Australia is now well positioned to benefit from a recovery in the domestic market when conditions improve.

“While the 2014 Financial Year has been an extremely tough year for the industry, I am confident that the Virgin Australia Group is in a strong strategic position going forward.

“This next period for us is about maximising the Group’s potential, by extracting value from the business and generating sustainable profitability”, Mr Borghetti said.

Financial and Operating Performance

“Total Group Revenue increased 7.1 per cent to $4,306.6 million on the 2013 Financial Year, including the additional revenue associated with the acquisition of Skywest. While revenue growth in the leisure and regional segments was subdued, this was partially offset by revenue growth in the Corporate and Government, Charter and Interline and Codeshare segments.

“Group Yield increased by 1.2 per cent, driven by a change in customer mix and improved access to global distribution channels following the introduction of the SabreSonic system in January 2013.

“The recently acquired Skywest business has now been fully integrated into the Virgin Australia platform and we are seeing positive performance from the Charter business which has increased its comparative revenue contribution by 30 per cent this financial year.

“International revenue increased 2.6 per cent compared to the 2013 Financial Year against the backdrop of strong competition and a particular weakness in the South East Asian market.

“As we outlined in February, Virgin Australia increased its focus on driving down costs during the second half of the 2014 Financial Year. Over the half, we implemented a number of major cost reduction initiatives including programs to reduce overall employment and procurement costs, as well as introducing a new Fuel Management System, targeting 2 per cent fuel efficiency savings by the end of Financial Year 2015.

“While there was a material increase in overall costs this year due to the full year impact of the Skywest acquisition in April 2013, Underlying CASK growth was well contained over the year, with a particularly strong performance in the second half.

“Virgin Australia incurred $117.3 million of restructuring costs11 during the 2014 Financial Year as a result of the balance sheet initiatives undertaken, the completion of strategic investments and the optimisation of the business platform. The business has also taken a restructuring provision for the exit of the two original Airbus A330 aircraft, as part of our program to reduce our future cost base through further fleet optimisation, and has booked an asset impairment charge of $56.9 million, driven predominantly by excess capacity and competitive pressure in the South East Asian market.

“We continued to exceed business efficiency project targets, delivering cumulative efficiency gains of more than $191 million and remain on track to deliver cumulative productivity gains of more than $400 million over the three years to 30 June 2015.

“With Virgin Australia’s major shareholders equity accounting their investments in Virgin Australia from 1 July 2014, it was appropriate for Virgin Australia to align its accounting policies with those of its shareholders and other industry participants. Consequently, a revised maintenance policy in relation to leased aircraft has been adopted which required a restatement of prior financial year results in the Appendix 4E. As a result of the adoption of this maintenance policy, there is an increase in the opening retained earnings and the equity of the business of $67.2 million.

“Virgin Australia operates a very successful Australian dollar designated hedging program, providing a large degree of short term certainty and longer term participation and protection. The program achieved effective fuel and foreign exchange rates during the 2014 Financial Year, delivering a result that was significantly favourable compared to spot prices.

“In order to reduce the volatility of reported financial performance attributed to the hedging program, Virgin Australia will adopt AASB 9 – Financial Instruments early, from 1 July 2014. As a result of the early adoption of this accounting standard, future statutory financial results going forward are expected to reflect reduced accounting ineffectiveness and deferral of time value of options until maturity for qualifying hedges. In the 2014 Financial Year, time value of options has been separately identified from the underlying results in anticipation of adopting this standard. The 2013 comparatives have been restated in the Financial Year 2014 ASX presentation to reflect this treatment.

“Virgin Australia acquired a 60 per cent interest in Tigerair Australia on July 8, 2013, with our share of equity-accounted losses for the 2014 Financial Year amounting to $46.1 million. Despite the challenging operating conditions, Tigerair Australia carried 500,000 more passengers than the previous year, with passenger numbers increasing to 3.3 million for the 2014 Financial Year.

“In terms of capacity growth, Virgin Australia recorded normalised growth of 0.112 per cent across the domestic network (excluding Tigerair Australia) for the 2014 Financial Year.

“Importantly, during the 2014 Financial Year, domestic Revenue Load Factors expanded 1.8 percentage points to 76.9 per cent, supported by a record 17.3 million customers choosing to fly with us.

“Virgin Australia is focused on delivering on time services for all of our customers and we have achieved an On Time Performance (OTP) of 84.0 per cent for the 2014 Financial Year, an increase of 2.9 percentage points compared to the prior corresponding period”, Mr Borghetti said.

Cash Position

“Virgin Australia paid down approximately $200 million in Gross Debt during the second half of the 2014 Financial Year and finished the year with a total cash balance of $783.8 million and an unrestricted cash balance of $541.0 million, up $203.3 million and $214.5 million respectively on 30 June 2013.

“We have significantly enhanced our balance sheet and liquidity through initiatives such as the issue of Enhanced Equipment Notes in October 2013, the Entitlement Offer in November 2013 and the sale and lease back of our Brisbane based office in May 2014. The proposed transaction with Velocity Frequent Flyer announced today will see a further boost to the liquidity position of the Group.

“Virgin Australia remains focused on maintaining a strong unrestricted cash balance and continues to review ways to utilise resources more efficiently”, Mr Borghetti said.

Game Change Program Strategy Update

“When we introduced the Game Change Program, it was a long-term strategy to reshape the airline and establish the Virgin Australia Group as a long-term player in all key segments of the Australian aviation market.

“Over the 2014 Financial Year, the Group focused on fast-tracking the completion of the Game Change Program and finished the strategy ahead of schedule.

“I am pleased to report that we have now increased our percentage of domestic revenue from the Corporate and Government market segment to more than 25 per cent, far exceeding our original strategic goal of 20 per cent. This is an enormous credit to all of our team members, who have worked tirelessly to ensure we could attract this important market segment.

“As a result of the important alliances we have forged and the implementation of SabreSonic, we have developed a comprehensive global virtual network and accessed growth markets around the world. In just a few years, the business has grown from offering around 150 destinations to more than 460 destinations and increased interline and codeshare traffic by more than 300 per cent.

“At the same time we have completed the important process of integrating and aligning the airline operations and brands, delivering and investing in one strong Virgin Australia brand that is recognised around the world.
“Under the Game Change Program, Velocity Frequent Flyer has gone from strength to strength, expanding its global network to over 460 destinations and offering competitive earn and redemption rates and unique member rewards. Over the last four years, the program has doubled membership numbers to 4.5 million and has built the widest retail offering of any program in Australia. Velocity has achieved a range of industry accolades, including recognition in five categories at the 2014 Freddie Awards, the highest achievement of any airline program at these global awards.

“Completing the transformation of the in-flight and on-the-ground experience under the Game Change Program has been a key focus for the business during the 2014 Financial Year, with significant enhancements to our lounge network, in-flight entertainment and catering”, Mr Borghetti said.

“It is thanks to the tireless efforts of every one of our team members that we have successfully implemented this strategy ahead of schedule in a challenging environment. We have transformed the business and our research indicates that we have now established Virgin Australia as the airline of choice14. Therefore we can confidently say that “The Game” has changed.

“I would like to thank all of our team members for their passion and dedication in delivering the strategy”, Mr Borghetti said.

Virgin Vision 2017

“Now that we have completed the Game Change Program, this next period for us is about maximising the Group’s potential, by extracting value from the business and generating sustainable profitability. To do this, we need to increase the growing customer loyalty to the Virgin Australia Group. That is what will assure our business of a stable future revenue stream and enable us to deliver sustainable profitability as the market recovers.

“A few years ago, many travellers were wedded to our competitor because they had no other viable alternative. The Game Change Program essentially created an indifference15 and helped to dislodge those travellers loyal to the incumbent airline group, so that they were happy to travel with either of us, whilst building a Virgin Australia loyalty base.

“Going forward, we no longer want to create an indifference for this group, we want to convert more of them to our loyalty base. Therefore, our Virgin Vision to 2017 is to become Australia’s favourite airline group.

“Over the next three years, the Virgin Australia Group will focus on six key areas: capitalising on growth business opportunities, driving yield enhancement, implementing a new cost program, optimising the balance sheet, setting a new standard in customer experience and developing our people to their full potential”, Mr Borghetti said.

Capitalizing on growth business opportunities

Velocity Frequent Flyer

“Velocity Frequent Flyer will be one of our key growth businesses, as we aim to build one of the world’s leading loyalty programs. Today’s announcement regarding a strategic transaction for Velocity Frequent Flyer is just the beginning. This transaction represents an opportunity to accelerate growth and value for Velocity and the Virgin Australia Group. Over the next three years we plan to grow membership to more than 7 million, further diversify Velocity’s partner mix, increase partner numbers and strengthen member engagement in both points earned and points redeemed.

Charter

“Charter also represents a significant opportunity for the Group to grow and diversify revenue. Our Charter business has had a very successful first year, delivering comparative revenue growth of around 30 per cent for the 2014 Financial Year, from a combination of new contracts, growth from existing clients and the launch of our first charter operations on the East Coast. This business continues to represent strong growth opportunities for the Group, and we expect it to deliver more than $200 million in revenue by 30 June 2017.

Freight

“In the 2015 Financial Year, we will launch a Freight division, which will leverage off our current Regular Passenger Transport and Charter capability. We expect the freight business to grow on a similar trajectory to our new charter business with revenue expected to treble to between $150 and $200 million over the next three years to 30 June 2017.

Tigerair Australia

“Our investment in Tigerair Austraia presents an important opportunity for the Group to participate in the growth of the budget market segment.

“The Tigerair business has undergone the first year of its transformation program, which sets out a clear path to profitability. The focus over the next three years will be on successfully executing this program, to achieve profitability in Financial Year 2017.

“This includes:

Further improving customer satisfaction – Customer experience is a major driver of revenue growth and will be a strong focus for Tigerair Australia, with significant progress already made during the 2014 Financial Year.
Driving incremental revenue growth – Tigerair Australia has implemented a number of revenue enhancing initiatives this year, including a new revenue management system. Further initiatives to help drive incremental revenue growth will be rolled out.

Delivering cost synergies – Tigerair Australia will implement a range of network, operational and financial synergies, building on the cost savings from synergies already delivered, including the launch of the Brisbane base, coordinated pricing and joint procurement of fuel purchases with Virgin Australia.

Develop an efficient operating platform and network footprint – Operational efficiency will be a continued focus. Tigerair has made a number of enhancements this year which will drive benefits, including launching a Brisbane base, securing a new more efficient maintenance provider in BAE systems and reaching agreement with Sydney Airport Corporation Limited about infrastructure constraints at Sydney Airport.

“We are committed to working with Tiger Airways Holdings Limited and Tigerair Australia to ensure the airline has the right network footprint, service standards and cost leadership, to deliver improved financial performance.

Drive yield enhancement

“In addition to capitalising on growth businesses, we will be focusing on other opportunities to drive yield enhancement. This includes increasing our target of Corporate and Government domestic revenue mix to around 30 per cent by 30 June 2017; increasing interline and codeshare revenue through strengthening and expansion of alliance partnerships and optimising our new PROS revenue management system to drive incremental revenue opportunities.

$1 billion cost program

“Importantly, cost will be a major focus over the next three years, building on the work of the Business Efficiency Project. Over the five years to 30 June 2017, the program will generate $1 billion in cumulative productivity gains and will centre on the following:

Enhancing procurement – individually and with alliance partners.

Improving productivity – including increased fuel efficiency, increased utilisation of the Boeing 737 fleet and the retirement of two 12 year old Airbus A330 aircraft; as well as bringing forward our Boeing 737 Max aircraft deliveries from 2019 to 2018.

Streamlining our operations – including the integration of Virgin Australia’s New Zealand operations into the rest of our international business and the consolidation of our long-haul international bases from three into two.
Optimise the balance sheet

“Going forward, optimizing the balance sheet will be central to maintaining a strong platform. The proposed transaction with Affinity Equity Partners and Velocity Frequent Flyer will improve the liquidity and gearing position of the Virgin Australia Group even further, providing additional flexibility and resilience as we execute on “Virgin Vision 2017”.

“As a result of this transaction, lease-adjusted balance sheet gearing will reduce by 8 per cent. The Group profit and loss impact from this transaction is expected to be neutral in the 2015 Financial Year. Over the next three years, we will continue to execute initiatives designed to improve liquidity, reduce debt and maintain a strong cash balance.

Set a new standard in customer experience

“The Virgin Australia Group will also maintain its strong focus on product and service and over the next three years, we will set a new standard in customer experience.

“While we cannot disclose all the initiatives for competitive reasons, they include: the introduction of Business Class on our Trans-Tasman and Fiji services from February 2015; the launch of our first Premium Exit at our Melbourne Airport lounge next month; the unveiling of a new state-of-the-art airport ground experience with the opening of our new terminal and lounge in Perth next year; and the upgrade of our Brisbane terminal and launch of our Darwin lounge in March next year.

“Furthermore, in the next few weeks, we will make a major announcement on our premium product offering.

Develop our people to their full potential

“Our people, and their willingness to go above and beyond for our customers and our shareholders, remains the Virgin Australia Group’s core differentiator in the market.

“We are committed to remaining the most attractive employer in the industry and, for that matter, one of the most desirable employers in Australia. It is our ability to attract, develop and retain the best talent, not just in the industry, but across Australia and beyond, that will see us succeed. Over the next three years, we will be rolling out a range of initiatives to continue to develop our people to their full potential.

“I would like to take this opportunity to thank all of our team members for their passion and dedication to delivering the Game Change Program strategy. We are privileged to have such a talented, devoted team and we are committed to supporting their development”, Mr Borghetti said.

Conclusion and Outlook

“The 2014 Financial Year was an extremely challenging year for the Virgin Australia Group and the Australian aviation industry as a whole.

“Given the uncertain economic environment we are unable to provide guidance for the 2015 Financial Year at this time and we will not be providing guidance on capacity growth going forward.

“However, the Virgin Vision to 2017 sets out a comprehensive plan of initiatives that will see us deliver a sustainable, profitable business over the long-term.

“While the current environment remains challenging, the Virgin Australia Group has significantly enhanced its strategic position over the last four years and is well placed to capitalise on market recovery”, Mr Borghetti said.

Copyright Photo: John Adlard/AirlinersGallery.com. Airbus A330-243 VH-XFE (msn 1319) taxies at Sydney.

Virgin Australia: AG Slide Show

Lufthansa Group reinstates flights to Erbil, Iraq

Lufthansa Group (Lufthansa and Austrian Airlines) (Frankfurt) has resumed flight operations to Erbil in northern Iraq. Austrian Airlines put its daily flight from Vienna back on the schedule yesterday (August 28). Flight OS 829 departed at 10:15 a.m. Lufthansa flies from Frankfurt to Erbil twice a week. The first scheduled flight is LH 696 on Saturday, August 30 (departure time 10:10 a.m.). Both airlines had most recently suspended their flights to Erbil on August 8.

According to the group, “The northern Iraqi city lies outside of the conflict zone controlled by IS. According to the most recent assessments, the security situation allows for safe flight operations to Erbil. The Lufthansa Group will continue to avoid Iraqi airspace in transit traffic, for instance to Asia and the Middle East. Furthermore, Lufthansa continues to carefully monitor the development of the security situation in Iraq and is in close regular contact with the respective international and national security authorities. The safety of passengers and crews is the highest priority for the airlines of the Lufthansa Group.”

Copyright Photo: Paul Bannwarth/AirlinersGallery.com. Lufthansa operates an Airbus A319 on the route. Airbus A319-114 D-AILR (msn 723) arrives in Zurich.

Lufthansa: AG Slide Show

Austrian Airlines: AG Slide Show