LONDON, April 4, 2002 (PRIMEZONE) -- Virgin Express (Nasdaq:VIRGY) (Euronext Brussels:VIRE):
Highlights
-- Virgin Express delivers EUR 130,000 profit after taxation versus
total loss of EUR 65.2 million in the year 2000.
-- Direct sales double since company freed from Sabena contract in
November 2001.
-- Independent strategy being pursued as preferred option over merger
with SN Brussels Airlines.
-- Virgin Express' low-fare concept with value for money now being
widely recognised by European travellers.
Chairman's Statement
I am very pleased to announce a net profit for the year 2001 of EUR 130,000 (EUR 65.2 million net loss in 2000). This result has been achieved in spite of the disruptions caused by the September 11 tragedy and the bankruptcy of Sabena on November 7, 2001. Our performance over last year was in line with the projections made twelve months ago.
In my Chairman's Report on the financial results for the year ending December 31, 2000, I outlined a three-phase recovery for our business:
Phase 1: "Refocus and restructure our business from a
Brussels hub to 8 major European cities." This phase
was completed in the first quarter of 2001 by cutting
our capacity from 23 to 13 aircraft, by withdrawing
from time based charter business and by closing down
our Irish operations and unprofitable routes.
Phase 2: "Improving the quality of our product and
delivering profits." In 2001 we made major progress
in this area. Our on-time performance is now
consistently above 90% and by the year-end we were
the best performing on-time airline in Brussels,
Copenhagen, Madrid and Rome and amongst the leaders
at other airports. Our on-board customer surveys
indicate consistently improving levels of service
and very high levels of customer satisfaction.
Morale at Virgin Express is high.
Phase 3: "Expansion" - In 2001 and the beginning of 2002,
we have made a very good start by expanding our
network of destinations from our Brussels hub. We
started the year serving eight major European cities
(Rome, Nice, Milan, London, Barcelona, Copenhagen,
Malaga and Madrid). By the end of 2001 we were
flying to thirteen destinations. With the start of
the summer programme Virgin Express is now flying to
Athens and Lisbon too. We are proud to be delivering
a superb "value for money" product to our customers
on this expanding network.
As a result of the successful completion of phases 1 and 2 of our restructuring, our results have improved dramatically from the losses in 2000. Our operating result would have been even higher at approximately EUR 10 million were it not for the bankruptcy of Sabena and the consequent sudden ending of our commercial agreement with that company in November 2001. However, since being freed from the constraints of the Sabena contract, we have worked hard to replace the lost income by creating a wider network. The travelling public has responded enthusiastically to this initiative and direct sales have more than doubled.
In my report of last year, I expressed concern about the future of Sabena, about the unfair subsidies of taxpayer's money given to them by the Belgian State and about the excess capacity in the market place, driven by Sabena's uneconomic pricing. In November 2001, Sabena went into receivership.
Soon thereafter a consortium of Belgian businessmen raised approximately EUR 150 million to reinvest in Sabena's short haul airline subsidiary and successor DAT (Delta Air Transport, now renamed SN Brussels Airlines). Over a four-month period, from November 2001 to the end of February 2002, we explored the possibility of a merger between SN Brussels Airlines and Virgin Express to create a single Belgian airline flying from Brussels Airport to 40 major cities. After detailed discussions both parties agreed to pursue their independent strategies. Virgin Express has a well-defined and well-understood value for money proposition to a growing number of European cities, for both business and leisure customers. We concluded that mixing the cultures of both businesses would have been detrimental to the interests of the Virgin Express business and its shareholders, customers and staff.
In 2001 we have made substantial progress in transforming the economics of our business. Our organization has coped extraordinarily well with enormous changes that have been undertaken. We have restructured the business back to a Brussels base. At the same time, we have coped with the September 11 crisis and the cessation of our Sabena contract, which accounted for over 40% of our revenue. In the short time since the collapse of Sabena, we have emerged significantly stronger. There is now a stable and capable management team and we have excellent staff relations with a workforce dedicated to delivering a "value for money" product into a rapidly expanding European market that is turning towards the low fare concept. This progress has been rewarded by increasing public support leading to current load factors of over 80%. At the same time, the management team continues its policy of keeping costs tightly under control, bringing operating expenses back to a level 40% lower than one year before.
In the year 2002, we intend to build on the successes of 2001. As previously announced we expect seasonal losses in the first quarter of 2002, followed by a profitable 2nd quarter. More and more people are now turning to low fare airlines like Virgin Express, having realized that we represent reliability and excellent value. We will continue to demonstrate that we care for our passengers more than do our competitors, as we believe this to be an important part of the increased popularity of our product. Once we have built our network in Brussels, we will consider expanding our operations by setting up a second European hub.
David Hoare Executive Chairman
Results for the Year
For the year 2001, the Company reported a net profit of EUR 130,000 versus a net loss of EUR 65.2 million in 2000. The net loss for the three months ended December 31, 2001 was EUR 1.2 million as compared to a net loss of EUR 37.7 million in the year earlier period. Net income per IDS and ADS for the quarter and full year are shown in the table below.
Earnings per IDS
and ADS
4Q 2000 4Q 2001 Year 2000 Year 2001
EUR per IDS (7.68) (0.24) (13.29) 0.03
USD per ADS $ (2.23) $ (0.07) $ (4.09) $ 0.01
Average Shares 4,907,500 4,907,500 4,907,500 4,907,500
USD/EUR (Average)
Exchange Rate 0.870 0.896 0.924 0.896
Revenues
During the fourth quarter 2001, overall revenue decreased by 30% to EUR 43.3 million from EUR 62.1 million in the comparable 2000 period. Full year revenue for 2001 amounted to EUR 212.1 million (2000: EUR 289.9 million), a decrease of 27% versus the previous year. The decrease in revenue was planned and a consequence of the first phase of the recovery plan, which was completed in 2000 and in the first quarter of 2001. This first phase foresaw a decrease of our capacity from 23 to 13 aircraft, a withdrawal from the time based charter business and a closing down of our Irish operations together with associated unprofitable routes.
Despite the tragic events of September 11th and the Sabena bankruptcy, the load factor in the fourth quarter remained at the same level (74.9%). For the full year 2001, occupancy was up by 8.4 percentage points from 73.3% to 81.7%. This spectacular achievement was mainly due to the successful implementation of the second phase of the restructuring plan ("Improving the quality of our product").
As a result of the restructuring and the improved product quality, the unit revenue for scheduled services were up 17% to 7.15 EUR cents per ASK. Furthermore, the introduction of the four main Global Distribution Systems (GDS) had a significant positive impact on yields and this form of distribution now accounts for approximately 35% of the company's total revenue.
Expenses
Total operating expenses were cut by 53% to EUR 44.8 million in the quarter, whereas the company took only a 30% decrease in revenue. The 2000 final quarter accounted for EUR 95.4 million operating expenses and the full year 2000 for a total of EUR 351.7 million. In 2001 the company successfully implemented additional processes of cost control and brought overall operating expenses back to EUR 210.6 million, a decrease of 40% versus the previous year.
In 2000, a restructuring provision was accrued for the discontinuance of the Virgin Express Ireland operations, and accounted for a total EUR 17.5 million. Even taking into account these extraordinary items, the operating expenses have been reduced by 37%.
Because the overall operating costs were significantly reduced in 2001, the company succeeded in maintaining its low system unit costs despite the negative impact of the capacity reduction in this area. The overall decrease in capacity of 47%, as a result of a decreased fleet size, was similarly reflected in operational fuel charges, flight operations, navigation fees and maintenance expenses, which all went down by 45 to 51%. Other costs decreased from 35 to 38%, as a result of the continuous process of cost control through better management of operational expenditure.
Contracts that expired during the period have been successfully renegotiated in a more competitive market place allowing future savings to be made particularly in handling services and telecommunications.
With the exception of the historical factual information, the statements made in this press release constitute forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward looking statements are based on current expectations and involve certain assumptions, risks and uncertainties that could cause actual results to differ materially from those included or contemplated by the statements. The company disclaims any obligation to update any forward-looking statements as a result of developments occurring after the issuance of the press release.
Virgin Express Holdings PLC
Unaudited Results for the Three and Twelve Months Ended
December 31, 2000 and 2001.
Three Months Ended Twelve Months Ended
(EUR Thousands) December 31 December 31
2000 2001 2000 2001
--------- --------- --------- --------
--------- --------- --------- --------
Revenue
Scheduled 49,071 38,559 204,590 181,713
Charter 8,825 2,125 72,039 9,366
Other 4,201 2,651 13,239 21,043
--------- --------- --------- --------
--------- --------- --------- --------
Total Revenue 62,097 43,335 289,868 212,122
Operating
Expenses
Flight
Operations 6,179 3,441 29,202 15,998
Aircraft
Fuel 12,191 6,033 53,275 26,235
Navigation
Fees 4,190 3,116 23,101 12,713
Maintenance 12,391 5,006 41,616 22,641
Aircraft
Ownership 33,104 10,660 90,439 56,074
Station
Operations 12,334 6,214 57,378 35,729
Passenger
Services 2,191 3,202 16,946 11,234
Sales &
Marketing 3,543 3,235 14,017 14,051
Depreciation &
Amort. 789 215 2,867 1,195
General &
Administrative 8,381 3,667 22,464 14,704
Stock Awards 71 - 395 -
--------- --------- --------- --------
--------- --------- --------- --------
Total Operating
Expenses 95,364 44,789 351,700 210,574
Operating
Profit/(Loss) (33,267) (1,453) (61,832) 1,549
Non Operating
Income/(Loss) (4,544) 1,128 (3,458) (669)
Profit/(Loss)
before
taxation and (37,811) (325) (65,290) 880
Tax and Minority
interests 97 (869) 90 (749)
Profit/(Loss)
after taxation
and Minority
interests (37,714) (1,195) (65,200) 130
Operating Data
Scheduled
Services
(Euro cents/KM)
RPKs (000) 576,343 457,481 2,465,247 2,076,928
ASKs (000) 768,999 638,391 3,361,037 2,542,399
Load Factor 74.9% 71.7% 73.3% 81.7%
Revenue per
RPK 8.51 8.43 8.30 8.75
Revenue per
ASK 6.38 6.04 6.09 7.15
Flights
Flown 6,520 4,890 28,069 20,366
Passengers
Flown 707,653 507,802 2,975,852 2,422,736
Charter Services
(Euro cents/KM)
RPKs (000) 145,923 25,271 1,550,314 125,318
ASKs (000) 172,808 44,420 1,786,609 196,405
Flights
Flown 702 164 6,474 954
Passengers
Flown 78,006 12,737 838,837 83,199
Block Hours
Flown 1,978 452 18,572 2,198
Total
(Euro cents/KM)
RPKs (000) 722,266 482,752 4,015,561 2,202,246
ASKs (000) 941,807 682,811 5,147,646 2,738,804
Revenue per
RPK 8.60 8.98 7.22 9.63
Revenue per
ASK 6.59 6.35 5.63 7.75
Flights
Flown 7,222 5,054 34,543 21,320
Ave. Flight
Length 864 887 988 863
Passengers
Flown 785,659 520,539 3,814,689 2,505,935
Block Hours
Flown 13,251 9,006 66,571 38,139
Fuel Gallons
(000) 9,154 6,431 49,132 26,288
Operating
Cost/ASK (1) 10.27 6.06 6.72 6.96
Ave Fuel Price
(US cents per
gallon) 115.61 83.30 99.25 87.42
Ave Exchange
Rate $/EUR 0.870 0.896 0.924 0.896
Ending Exchange
Rate $/EUR 0.931 0.881 0.931 0.881
Ave Exchange
Rate BEF/$ 46.37 45.04 43.66 45.04
Ending Exchange
Rate BEF/$ 43.33 45.77 43.33 45.77
(1) Excludes cost associated with Virgin Catering Services N.V./S.A.
(Formerly Virgin Express Tax Free Shops)