Atlantic Airways reports growth in challenging market
Source: Atlantic Airways
Atlantic Airways, the national carrier of the Faroe Islands, has recorded a three per cent year-on-year increase in revenue in the second quarter of 2012. However, in an uncertain market, earnings fell slightly.
The period saw the successful introduction of Atlantic Airways’ new Airbus A319 and of a leased AW 139 helicopter for use on a contract to support Statoil exploration activities in Faroese waters.
Revenue in the second quarter rose to DKK 122.8 million (£13.09 million) from DKK 118.8 million (£12.66 million) in the corresponding period in 2011. The rise is mainly down to increased activity in the helicopter segment, but the result before tax decreased to a profit of DKK 6.9 million (£730,000) compared with a profit of DKK 12.1 million (£1.3 million) in the second quarter of 2011.
EBITDA (earnings before interest, tax, depreciation and amortisation) for the first half of 2012 were DKK 31.7 million (£3.36 million), compared with DKK 32.2 million (£3.43 million) for the first half of 2011, a decrease of two per cent. The result before tax for the first half of 2012 amounted to DKK 1.7 million (£180,000), compared with DKK 9.5 million (£1.01 million) in 2011, and the result after tax DKK 1.4 million (£148,000), compared with DKK 7.8 million (£826,000) last year.
The airline’s Q2 report states: “The main explanatory factors for the lower result in Q2 are higher capital costs (because of the new Airbus 319) and a lower contribution from charter and ACMI* activity in Europe. However, a lower contribution from scheduled services, due to seasonality, and lower load factor, as well as increased fuel costs and the strengthening US dollar also had an impact.”
The report notes the successful introduction of the new Airbus and comments: “In general, the experience from the first four months is positive and meets expectations, however a full-year cycle will provide a better understanding of the overall impact.”
Chief Executive Magni Arge comments: “The introduction of a factory-new Airbus 319 equipped with RNP AR navigational aid system has changed the aviation environment in the Faroe Islands. It supports our goal to improve regularity and lower unit cost in order to provide The Faroese people with the best service possible. We have not seen all the impact yet, but improved regularity, enhanced safety, greater comfort, new destinations, reduced CO2 emissions and lower unit costs are some of the benefits we will optimise in the future.
“In the second quarter the helicopter operation has shown a solid potential through its additional involvement in offshore operations and we look forward to working with Statoil during its exploration campaign in Faroese waters in Q3.”
Passenger numbers on scheduled services increased by four per cent in the first half, compared with the first half of the previous year, and increased by one per cent in the second quarter, compared with the second quarter of 2011. Passenger numbers in the second quarter were negatively impacted by the seasonal effects of the Easter period and a later school holiday start, in June.
The load factor on scheduled services decreased in the first half from 77 to 72 per cent, compared with the first half of 2011, and decreased from 81 to 71 per cent in the second quarter of 2012, compared with the same period last year, owing to increased seat capacity since the new Airbus 319 aircraft entered service. Adjustment of capacity led to an improved load factor in May and June, compared with April, when the load factor was considerably lower than the year before.
Oil activity and fluctuations related to holiday seasons will support traffic development in Q3 and campaigns to support traffic in Q4 are expected to increase this in the second half of 2012. The Airbus operation is expected to support a lower unit cost and decrease irregularity, as well as opening up new initiatives in the leisure segment during winter 2012.
Outlook for charter and ACMI are still lower, but in Q3 capacity provisions for tour operators out of Denmark, as well as air logistic support to offshore activity, are stable, while outlook for Q4 is more questionable.
The report concludes: “Fuel prices and external economic factors are still unpredictable and are capable of having a significant impact. Severe disruption and irregularity from adverse weather in July are expected to cause higher cancellation and diversion costs in Q3 compared with the corresponding period last year. We remain cautious in our guidance as to financial performance in 2012 and expect a result closer to the 2010 levels, rather than to those of 2011.”
* ACMI is defined as a charter contract including aircraft, crew, maintenance and insurance.