Deteriorating trend due to Coronavirus puts pressure on third quarter results of Austrian Airlines

Austrian Airlines issued this statement:

• 3rd quarter of 2020: Adjusted EBIT of minus EUR 106 million
• CFO Andreas Otto: “The coronavirus really spoiled the summer business for us”
• Rising infection rates require cutback in flight operations

As a consequence of the second wave of the coronavirus crisis and the related high number of adjustments to flight operations, Austrian Airlines reported adjusted earnings before interest and taxes (adjusted EBIT) of minus EUR 106 million in the third quarter of 2020 compared to the positive results of EUR 70 million in the prior-year quarter. Accordingly, the adjusted EBIT for the first nine months of 2020 equaled minus EUR 341 million. The number of passengers transported by Austrian Airlines fell by 75 percent to about 2.8 million due to the many travel restrictions which have been imposed.

“As an airline, we normally make money in the summer months. However, this year the coronavirus spoiled things for us. The patchwork set of regulations within Europe and the new lockdown decrees in many countries are further aggravating the situation”, explains Austrian Airlines CFO Andreas Otto.

Results in detail
In the middle of August, Austrian Airlines operated at its highest capacity in the year 2020, comprising about 30 percent of flight operations compared to the prior-year level. The situation has deteriorated since this time as a result of the large number of travel restrictions. Revenue in the period July to September 2020 fell by 85 percent year-on-year to EUR 93 million. In the same period, the adjusted total operating revenue also declined by 85 percent from the third quarter of 2019 to EUR 102 million (Q3 2019: EUR 667 million). Operating expenditures amounted to EUR 208 million, corresponding to a drop of 65 percent (Q3 2019: EUR 597 million). The adjusted third-quarter EBIT amounted to minus EUR 106 million.

Revenue in the first nine months of 2020 was down by 85 percent to EUR 414 million (Q1-3 2019: EUR 1,612 million). The adjusted total operating revenue decreased by 72 percent to EUR 465 million (Q1-3 2019: EUR 1,678 million). Operating expenditures in the first three quarters of 2020 were down 51 percent to EUR 806 million (Q1-3 2019: EUR 1,661 million). Corresponding countermeasures have been taken, as reflected in the expansion of short time working at Austrian Airlines as well as comprehensive cost reduction measures. The adjusted EBIT, which does not include valuation losses or gains from aircraft sales, equaled minus EUR 341 million in the first nine months of the year (Q1-3 2019: EUR 17 million). EBIT in this period amounted to minus EUR 404 million. Nevertheless, cumulative EBIT and liquidity are still above business plan.

Current development of bookings and capacity utilization
The intensification of measures to combat the coronavirus also makes it more difficult for Austrian Airlines to plan daily flight operations. The so-called “lockdown light” imposed by the Austrian government for the time being for the period November 3 – November 30, 2020 leads the airline to expect a further drop in demand. At present the red-white-red flag carrier has reduced flight operations to about 20 percent of its comparable offering in the previous year, far less than originally planned for the winter months. Further flight plan adjustments are under preparation. The accumulated capacity utilization (passenger load factor) in the first nine months was about 65 percent, down from the current level of under 50 percent. Booking behavior continues to be on very short notice and restrained.

“The 2020/21 winter season will be cold and tough for us, like for so many other airlines”, states CFO Andreas Otto. “What still gives us security at present is the good liquidity situation, but we must nevertheless use all measures and levers to further reduce our costs and expenditures and make our company winter-proof. The coming months will remain challenging. But we will survive the hard winter. Next summer will be decisive.”

Structural measures should provide further relief
Long before the crisis, Austrian Airlines presented the PE20 process efficiency programme. This programme also contains a large number of structural measures designed to improve the cost position of the domestic airline in the long term. The current crisis situation has made them even more urgent. On the already familiar centralization of crew bases for flight attendants & pilots is still being worked on. The bases in Altenrhein (Bregenz), Klagenfurt and Salzburg were closed on March 31 and Linz, Graz and Innsbruck on October 31. All aircraft of the Austrian airline are to be stationed in Vienna in future. This will also result in a centralization of aircraft maintenance. Talks are underway to reorganize the structure accordingly. This concerns the technical stations in Graz, Salzburg, Innsbruck and Linz.

The contracts for ground handling in Salzburg and Klagenfurt were terminated by the respective airports. In Klagenfurt, discussions are currently underway regarding a transfer of operations, so that our employees can continue to work at the airport. Unfortunately, it was not possible to find a business transfer solution in Salzburg. The employees in Salzburg have received offers to transfer to Vienna. If it is not possible to transfer their place of residence to Vienna, Austrian Airlines would like to find amicable solutions with those affected.