Austrian Airlines Reduces Profit Forecast for 2014

Published on : Thursday, July 31, 2014

Austrian-AirlinesAustrian Airlines positively concluded the second quarter of 2014 with an operating profit of EUR 10 million.


Due to the traditionally weak first quarter, Austrian Airlines posted an operating loss of minus EUR 44 million in the first half of 2014 (H1 2013: minus EUR 35 million).


The decline of EUR 9 million from the previous year can be mainly attributed to the need to set aside provisions to cover claims arising from the legal dispute on the potential after-effects of the collective wage agreement for flight personnel.
“The legal signals from Luxembourg have led us to allocate provisions for the legal dispute with the Works Council for the flight and cabin crew”, says Austrian Airlines CEO Jaan Albrecht.


“This negatively impacts our earnings but above all our future plans as well, due to the fact that we have had to stop our investment program to expand the long-haul fleet.


The management and Works Council for the flight and cabin crew are once again called upon to find a solution to the conflict.”
In the first half of 2014, total operating revenues fell by 3.4 percent from the prior-year level to EUR 1,008 million (H1 2013: EUR 1,043 million).


At the same time, operating expenditures could be further reduced by 2.4% to EUR 1,052 million (H1 2013: EUR 1,078 million).


As a consequence, the operating results of Austrian Airlines as of June 30, 2014 amounted to minus EUR 44 million (H1 2013: minus EUR 35 million).


The reason for the deterioration in earnings is the already-mentioned allocation of provisions for legal proceedings in connection with the lawsuit filed by the Works Council for the flight and cabin crew.


In 2012, following the failed negotiations with the Works Council, Austrian Airlines terminated the collective wage agreement.


In response, the trade union terminated the collective wage agreement at Tyrolean and filed a lawsuit.


Subsequently the Austrian Supreme Court referred the case to the European Court of Justice.


At the beginning of June the Advocate General of the European Court of Justice presented his conclusions on the after-effects of the former collective wage agreement for the Austrian Airlines flight personnel.


In his opinion, the working conditions stipulated by the former collective wage agreement, which are to remain in force in accordance with Austrian law despite the cancellation of the agreement, continue to be valid but in a diluted form.


Austrian Airlines posted an operating profit of EUR 10 million in the second quarter of 2014, but this was still below the comparable operating profit of EUR 21 million in Q2 2013.
Crisis regions in Europe and the Middle East, good performance in North America
Moreover, in its function as a specialist for flights to Eastern Europe, the business of Austrian Airlines has been negatively affected by the war zones in the region of Ukraine and Russia.


The airline has suffered from a decline in operating revenues and passenger volumes in this region. A similar situation exists in the Middle East.


For the time being, Austrian Airlines has cancelled flight to the destinations of Damascus, Tripoli and now Bagdad.


The situation remains tense with respect to flight service to Tel Aviv.
In contrast, the performance on long-haul routes to North America has been gratifying.


The new destinations of Chicago and Newark have developed extremely well, both in terms of capacity utilization as well as earnings.


The expanded flight offering to Washington, where the former Boeing 767 aircraft was replaced by a larger Boeing 777, has also been well received by passengers.
In the first six months of the year, approximately 5.4 million passengers flew with Austrian Airlines, comprising an increase of 1.4 percent year-on-year. Capacity was raised by 3.1 percent, whereas revenue passenger kilometers (RPK) climbed by 5.4 percent to 8.5 billion . As a consequence, capacity utilization further improved by 1.7 percentage points to 77.4 percent.
The total staff of the Austrian Airlines Group including its fully consolidated subsidiaries amounted to 6,300 employees at the balance sheet date of June 30, 2014 (June 30, 2013: 6,244 employees).

The increase in the number of employees is related to the additional Boeing 777 in operation.
Austrian Airlines continued to achieve a top performance with respect to reliability and punctuality.

Featuring a punctuality on departure of 91.0 percent and punctuality on arrival of 89.9 percent, the punctuality of Austrian Airlines flights continued to surpass the global average. The regularity of flight operations amounted to 99.1 percent.
Austrian Airlines also achieved top rankings with respect to the quality of its flight service at the renowned Skytrax – World Airline Awards 2014.


The airline was given a first place rating in the category “Best Airline Staff Service in Europe“, amongst other awards.
Austrian Airlines expects positive operating results for the entire year 2014 in spite of the allocation of provisions and the ongoing challenging business environment.


“We are striving to achieve annual results in 2014 as a whole which are on par with the previous year’s performance”, states Austrian Airlines CEO Jaan Albrecht.

source: Austrian Airlines

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