Profitable Q2 for Virgin Express

Paris, FRANCE


LONDON, Sept. 7, 2004 (PRIMEZONE) --


                  Profitable Q2 for Virgin Express

LONDON, Sept. 7, 2004 (PRIMEZONE) -- Virgin Express Holdings PLC (Euronext: VIRE) (OTCBB:VIRGY):


   Highlights
  - Operating profits up 10% in the quarter.
  - Tough competitive environment.
  - Unit costs managed down lower than revenue declines.
  - Productive discussions continue between the Virgin Group and
    the shareholders of SN Airholding, the main shareholder
    of SN Brussels Airlines.

Chairman's Report:

I am pleased to report operating profits for the quarter of EUR 3.2 million, up 10% versus last year. A 13% reduction in revenues caused by a reduction in our fleet from 13 to 11 aircraft has been more than matched by additional cost savings. Our unit costs are now down to EUR 0.05 per available seat kilometre (ASK), the lowest ever in our history and lower than all our competitors operating from major airports.

Our market has for some time suffered from excess capacity. Ticket prices have fallen for most participants, often well below cost, leading to heavy losses on the European networks of many of our larger competitors. In a normal business environment we would expect competitors to cut both costs and capacity, or to go out of business. Our routes to Rome and Milan have particularly suffered from these problems and in response, we have cut capacity to reduce our losses. The harsh market conditions that have prevailed over recent years confirm our view that consolidation is essential in the European short -haul market.

Load factors for the 2nd Quarter at 76% have been ahead of those achieved in the 1st Quarter, but they have fallen short of those of last year. Competition has been intense making it difficult to fill even our reduced capacity.

Despite this reduced capacity, and therefore our reduced revenues, we have found ways to further manage costs down across all cost categories, with the obvious exception of fuel. Overall costs have declined by 14%. Non fuel costs have declined by 17%. Bringing down our costs and increasing efficiency are important priorities in ensuring that we are able to withstand a very tough, and a sometimes uneconomic competitive environment. However, we have not lost sight of delivering the highest level of friendly service to all our customers. Our passengers insist on value for money fares but they also desire high levels of service. In particular they want good punctuality. In the 2nd Quarter Virgin Express outperformed not only the members of the Association of European Airlines but also all major European low cost carriers with 93.6% of its flights leaving within fifteen minutes of scheduled departure time and 94.2% of all Virgin Express flights arrived on time. In addition, our new web site allows our customers to book additional legroom seats and to pre-order food of a standard previously available only in a first-class cabin. Internet booking has now risen to 73% of all passengers compared to 52% early September 2003.

Forecasting year-end performance continues to be difficult, particularly as fuel prices remain at almost historic highs. On the other hand we benefit from the strength of the Euro and from lower lease costs on our fleet.

Positive discussions continue between the principle shareholders of both Virgin Express and SN Brussels Airlines to form a joint holding company. Any further announcement on this matter will be made only if and when material progress is made.

David Hoare Executive Chairman

Results for 2nd Quarter

For the 2nd quarter of 2004 the company reported a profit after tax of EUR 1.95 million versus a profit of EUR 0.12 million in the 2nd quarter of 2003.

For the 1st semester of 2004, the company reports a loss after tax of EUR 6.2 million, compared to a loss after tax of EUR 11.6 million for the first six months of the year 2003.

Net income per IDS and ADS for the quarter are shown in the table below.


    Earnings per IDS and ADS
                   2Q 2004    2Q 2003  6 Months 2004  6 Months 2003

 EUR per IDS      E 0.05    E 0.024       E (0.16)       E (2.40)

 USD per ADS      $ 0.06    $ 0.027       $ (0.19)       $ (2.62)

 Average Shares
  (1)         39,950,625  4,907,500     39,950,625      4,907,500

 USD/EUR
 (Average)
  Exchange Rate    1.205      1.105          1.195           1.09

 USD/EUR
  (Ending)
  Exchange Rate    1.216      1.143          1.216          1.143

(1) On 28 April 2003, each ordinary share of E0.0024789 together with one ordinary share of E0.0075211 (issued by way of a capitalisation of reserves) was consolidated into one new ordinary share of E0.01. There was no change to the number of shares as a result. On the same date, Virgin Express Holdings PLC increased its authorised capital and made a "Placing and Open Offer" of 35,108,125 new ordinary shares to the company's majority shareholder Virgin Sky Investments Limited and other qualifying shareholders (i.e. IDR holders but excluding ADR holders in the US). This was underwritten by the IDR holders (through the registered holder Guaranty Nominees Ltd) for an amount of E2,589,439 in consideration for the allotment of E2,589,439 new ordinary shares of E0.01 each at an issue price of E1.00. Virgin Sky Investments Ltd subscribed to the remainder, i.e. for an amount of E32,518,686 in consideration for the allotment to it of 32,518,686 ordinary shares at the same issue price of E1.00.

Revenues

Total revenues of the 2nd quarter and the first 6 months decreased respectively by 13% and 12% to EUR 50.7 million and EUR 88.1 million, compared to respectively EUR 58.2 million and EUR 99.8 million a year ago. The decrease in total revenue is mainly due to the reduction in the number of sublease aircraft and to the cessation of the code-share agreement with SN Brussels Airlines as from April 2003.

New services, such as extra legroom, and continued focus on the ancillary revenue (catering on board, overweight baggage, etc) led to a further increase in other revenues.

Expenses

The total operating expenses decreased by 14% to Euro 47.5 million for the 2nd quarter and by 13% to EUR 92.4 million for the 1st semester 2004 versus last year.

In the first half of 2004, the company continued the process of cost control and reduction. Its system unit costs further decreased in the 2nd quarter to 5.00 Eurocents per ASK, versus 5.07 Eurocents in 2003.

Over the first 6 months the unit costs reduced from 5.39 Eurocents in 2002 to 5.09 Eurocents.

A table of quarterly and half year results is attached.


                 Virgin Express Holdings PLC
        Unaudited Results for the Three Months Ended
                      30 June 2003 and 2004
  (EUR Thousands)
               Three Months Ended     Six Months Ended
                    30 June                30 June
                 2003     2004    var     2003      2004   var



 Total Revenue     58 156   50 711   -13%  99 841     88 097  -12%

 Operating Expenses

 Flight Operations 4 644    4 113   -11%    8 670      8 102   -7%

 Aircraft Fuel     7 344    7 734     5%   13 505     13 463    0%

 Navigation Fees   5 527    4 779   -14%   10 065      9 048  -10%

 Maintenance       6 706    4 999   -25%   12 608     10 419  -17%

 Aircraft
  Ownership        8 137    6 355   -22%   17 568     13 903  -21%

 Station
  Operations       9 519    8 212   -14%   17 898     16 492   -8%

 Passenger
  Services         3 269    3 006    -8%    6 695      5 709  -15%

 Sales &
  Marketing        5 187    4 194   -19%   10 064      7 535  -25%

 Depreciation &
  Amort.             507      396   -22%    1 140        787  -31%

 General &
  Administrative   4 429    3 743   -15%    8 475      6 903  -19%

 Total Operating
  Expenses        55 270   47 532   -14%  106 686     92 361  -13%

 Operating Profit
  /(Loss)          2 887    3 179    10%   -6 844     -4 265   38%

 Non Operating
  Income/(Loss)   -2 556   -1 018    60%   -4 537     -1 614   64%


 Profit/(Loss)
  before taxation
  and                330    2 161   555%  -11 382     -5 879   48%

  Tax and
   Minority
   interests        -231     -213     8%     -266       -359  -35%

  Profit/(Loss)
   after taxation
   and Minority
   interests        117    1 948  1565%  -11 630     -6 238   46%

 Operating Data (Euro cents/KM)

 RPKs (000)    894 822  718 150   -20% 1 613 258  1 282 055  -21%

 ASKs (000)  1 078 747  943 064   -13% 1 959 378  1 800 272   -8%

 Revenue
  per RPK         6.50     7.06     9%      6.19       6.87   11%

 Revenue
  per ASK         5.39     5.38     0%      5.10       4.89   -4%

 Fleet Size      13.00    11.00   -15%     13.00      12.00   -8%

 Flights Flown   5 497    4 719   -14%    10 117      9 247   -9%

 Ave. Flight
  Length        1 214    1 211     0%      1 229      1 224    0%

 Passengers
  Flown       677 117  536 833   -21%      1 239 228 985 168  -21%

 Load Factor     83.0%    76.2%   -7%       82.3%      71.2%  -11%

 Block Hours
  Flown        11 784   10 088   -14%     21 708     19 735   -9%

 Fuel Gallons
  (000)         8 739    7 513   -14%     15 869     14 410   -9%

 Operating Cost
  /ASK           5.07     5.00    -1%       5.39       5.09   -6%

 Ave Fuel
  Price
  (US cents
   per gallon)  94.63   117.43    24%      93.49     109.46   17%

 Ave Exchange
  Rate $/EUR     1.105    1.205     9%      1.089      1.195   10%

 Ending Exchange
  rate $/EUR     1.143    1.216     6%      1.143      1.216    6%

With the exception of the historical factual information, the statements made in this press release constitute forward-looking statements under the safe harbour 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.


        

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