SkyEurope reports financial for third quarter
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SkyEurope Airlines
Q3 2008 was a challenging quarter for the entire airline industry including SkyEurope as fuel prices rapidly rose.
These record high fuel prices had a negative impact on our passenger and revenue growth during the quarter (passenger numbers up 19.8% on a YTD basis) as we have been forced to increase fares and cut capacity to eliminate poor performing routes. It has also had a significant impact on our cost base as the increase in fuel prices offset the significant improvements we have made on lowering our unit costs.
Despite the difficult operating environment and the occurrence of Easter in the previous quarter compared to the previous year, we were able to maintain stable revenue (up 14.4% for the year) and had a slight improvement in passenger growth
during Q3, up 3.3%, however our revenue per seat and overall scheduled revenue decreased during the quarter. This was primarily due to Easter not being in Q3 this year, the high fuel prices and the downward yield pressure caused by a higher proportion of new routes in Q3 2008 vs. Q3 2007.
The slight decrease in scheduled revenue was offset by an 81.2% increase in ancillary revenue during the quarter as we implemented a baggage fee and other additional ancillary revenue products to help compensate for the increase in fuel prices and extract the full value of our customers. One key element of our turn- around strategy, is ancillary revenue growth and the significant increases here are encouraging. We see this trend continuing and accelerating through the fourth quarter and already in forward bookings into the next fiscal year.
Our focus on cost reductions continued in Q3 and we were able to reduce our ex-fuel costs significantly, by 12.9% building on improvements we made during the first half of our fiscal year. Significant unit cost reductions were realized in sales and marketing expenses, maintenance, materials and repairs, administrative expenses, aircraft rental, and insurance. However, these improvements were overshadowed by offsetting record fuel costs. To partially compensate, we have managed to reduce fuel consumption through our inter-departmental fuel consumption policy with consumption reduced by up to 3% on most sectors.
Overall, our results have been significantly impacted by the high fuel prices, our EBIT loss increased from EUR 5.2 million in Q3 2007 to EUR 14.0 million in Q3 2008 and our net loss increased from EUR 5.1 million to EUR 16.8 million.
Report of the Third Quarter (Q3) of FY 2008
Quarterly Report Q3 FY 2008
Further to this, in June SkyEurope exercised two of its purchase rights and now has eleven additional aircraft on firm order to be delivered from 2008 through 2013 and an additional three Boeing purchase rights that SkyEurope can exercise for delivery in 2011 and 2012 depending on capacity needs. In total, we expect to have up to twenty six aircraft in our fleet by the end of 2013.
In the current environment of high fuel prices, we are continually reviewing our schedule and making necessary adjustments to maximise profitability and to take advantage of opportunities as they arise. We have implemented a capacity reduction program for the upcoming winter period and have entered into an agreement with GECAS, our largest aircraft lessor, to redeliver 2 leased aircraft in October 2008 and
January 2009. These redeliveries will be replaced by new aircraft that will be delivered in May and June 2009 in time for the 2009 summer schedule.
Outlook
The high fuel prices continue to negatively impact SkyEurope and the industry. However, we are moving forward with fundamental improvements in our business including continuing cost reductions and significant revenue improvements in order to offset rising fuel prices and to grow our network to maturity.
We are expecting revenue growth in Q4 2008 versus Q4 2007 with higher passenger numbers and ancillary revenue growth. However growth during this quarter will be slower than it has been in past years due to capacity reductions undertaken due to high fuel prices.
(c) Centre for Asia Pacific Aviation. Date posted: 29-Aug-08
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SkyEurope reports financial for third quarter 
