Berlin, 16 March 2012
ANALYSTS’ & INVESTORS’ PRESENTATION
AIR BERLIN PLC
1
2
AGENDA – Analysts‘ & Investors‘ meeting, 16 Mar. 2012 page
2
3
15
Topic 1 Review 2011
Topic 2 Overview 2012
18 Focusing the business model
22 Measurements to improve profitability
33 Outlook 2012
Macro-economic development
3
2011 has mainly been influenced by factors which were beyond the control of airberlin
3
Fuel & Dollar
Negative development of both led to:
cost increase and the need for further price increase
especially in smaller catchments this led to a drop in SLF as demand fell
Aviation tax
…imposed a heavy burden as this presented close to 5% cost increase on top of fuel
EUR 166 m burden in 2011
„Arab Spring“
loss of profits to North Africa destinations
change of the capacity alignment
lower margins in other leisure destinations due to overcapacity issues
2011
AT
$
Cautious consumer behavior
• Late booking pattern leading to less ability to forecast bookings
4
airberlin reacts to the economic pressure by launching a new efficiency program
4
Sharpening the Business model
offering a worldwide network for business and leisure with access through multi distribution channels
Shape & Size - Our fitness program
A comprehensive program to improve profitability • Network optimization • Optimized corporate organization • Cost reduction • Reduction of complexity
Financing activities • Aircraft sliding to improve the CAPEX (Investment
reduction by $ 508 m in 2012 and by $ 1,128.4 m in 2013*) and reduce capacity pressure
• Bond issuance in November EUR 100 m
New partners • Etihad and airberlin entered a deep strategic
partnership covering commercial activities on network and sales plus financial involvement making Etihad the largest shareholder
• oneworld® membership with effective date 20 March 2012
Initiatives taken to strengthen airberlin’s position in a competitive market
A
B
C
D
…to strengthen and well position airberlin for the future
* based on current average list prices as of 10/25/11
5
Financial Performance 2011
5
REVENUE EBITDAR
EBIT NET income
-16.7
2011
-247.0
2010 PF
619.9
-31.3%
2011
425.9
2010 PF
3,850.2
+9.8%
2011
4,227.3
2010 PF
-271.8
2011 2010 PF
-106.3
Revenue increase of 10 % compared to 2010 driven by increase in SLF and Yield
Next to the EUR 194 m negative swing on EBITDAR level, higher cost of AC (USD impact) led to negative EBIT swing of EUR 230 m
Huge cost increases especially from aviation tax (EUR 166 m) and fuel (EUR 229 m) and non-recurring items in 2010 impacted EBITDAR negatively despite revenue growth
Net income development is in line with EBIT development; within financial result app. EUR 39 m negative from MTM evaluation and FX development
* pro forma (PF): incl. NIKI 1H
6
airberlin's revenue increased by 10 % compared to previous year
Revenue split [EUR m]
+13.2% +1.5% +9.2% +62.0% +9.2% -1.7%
Total revenue
4,227.3
Others
253.7
Onboard sales
38.6
A/P tax
revenue
78.0
Flight revenue
3,857.0
Charter
1,233.9
Seat only
2,623.1
+9.8%
Change from FY 2010 PF
* pro forma (PF): incl. NIKI 1H
• Charter increased by only 1.5% especially due to Northern Africa crisis and subsequent capacity shifts and due to price pressure
• Seat only grew strongly due to yield and load increase
• Onboard revenue slightly decreased due to reduction in long-haul operation
• Growth in cargo revenue is the strongest driver for other revenue
7
Operational development – good total revenue per ASK performance
7
Passengers [m] Seat load factor [%] Yield 1) [EUR]
+1.2%
2011
35.3
2010 PF
34.9
+7.9%
2011
109.3
2010 PF
101.2 +1.7%p.
2011
78.2
2010 PF
76.5
* pro forma (PF): incl. NIKI 1H
Capacity [m]
-1.1%
2011
45.1
2010 PF
45.6
Revenue 1)/ASK [EUR ct.]
+7.8%
2011
6.80
2010 PF
6.31
Yield = Flight revenue per passenger // Revenue = total revenue
8
Cost/ASK on EBIT level in 2011 – burdened by fuel and aviation tax
8
Cost/ASK incl. fuel & aviation tax [EUR ct.]
Cost/ASK excl. fuel [EUR ct.]
Cost /ASK excl. fuel & excl. aviation tax [EUR ct.]
* pro forma (PF): incl. NIKI 1H
+12.3%
2011
7.21
1.10
0.38 0.46
0.76
1.08
1.47
0.27
1.69
2010 PF
6.42
1.02
0.33 0.47
0.78
1.04
1.44
1.34
Others
MRO
Navigation
Personnel
Leasing & AFA
A/P charges
Aviation tax
Fuel
2010 PF
5.08
1.02
0.33 0.47
0.78
1.04
1.44
+8.8%
2011
5.53
1.10
0.38 0.46
0.76
1.08
1.47
0.27
1.10
0.38 0.46
0.76
1.08
1.47
2010 PF
5.08
1.02
0.33 0.47
0.78
1.04
1.44
2011
+3.6%
5.26
9
Development of Expenses Direct operating expenses [EUR m]
139.3
285.6
818.9
877.5
+20.9%
Others
Catering incl. onboard sales
Navigation
Fuel
Aviation tax Airport charges
2011
2,717.5
158.2 143.3
1,048.1
165.6
916.6
2010 PF
2,247.8
125.4
286.7
+0.3%
2011
475.4
2010 PF
473.9
Personnel expenses [EUR m]
+10.0%
Other
Distribution
Marketing
Insurance
MRO
2011
618.5
272.6
25.0 67.0 19.8
234.1
2010 PF
562.1
248.8
23.3 65.7 20.3
204.0
Other operating expenses [EUR m]
* pro forma (PF): incl. NIKI 1H
10
Cost of aircraft ownership
10
Lease & depreciation expenses [EUR m]
Depreciation
Leases
+7.5%
2011
649.9
62.9
587.0
2010 PF
604.7
67.7
537.0
+3.5
Dec 2011
170.6
10.0 7.0
67.6
14.0
72.0
Disposals / Lease expires
1.3
75.4
3.4
Additions
3.5 3.7 1.0
Dec 2010
167.1
1.3 10.0
3.5
63.9
13.0
B767/757
DH8H
E190
B737 family
A330 family
A320 family
Development of number of aircraft [#]
* pro forma (PF): incl. NIKI 1H
11
Financial result 2010 vs. 2011 Breakdown of financial result [EUR m]
Expenses Income Currency & derivatives effects
Interest income increased Interest expenses were higher in 2010 due to buyback of convertible bond
Market to market effects due to USD rate development; non-cash
+44%
2011
9.8
2010
6.8
2010
-115.4
+28%
2011
-82.7
2011
-58%
-39.0
2010
-24.7
12
Equity and liquidity position of airberlin
12
Development of equity and liquidity [EUR m]
• 2010 affected by buyback of convertible bond and loss
• 2011 loss nearly cut equity in half
• 2010 sale of aircraft and repayment of debt to mitigate weaker operational cashflow
• Negative operational cashflow reduced liquidity
• Financial cashflow and investment cashflow nearly matching
0.6
Loss
-271.8
hedge
account./OCI
19.6
2010
end
505.3
Redemption
convertible
bond/other
-23.4
Loss
-97.2
hedge
account./OCI
15.9
2009
end
610.0
2011
end
253.7
Redemption
convertible
bond/other
372.1
Invest CF
449.9
Operational
CF
-10.0
2009
end
Operational
CF
-62.5
Invest CF
-402.3
-196.4
Financial CF 2010
end
409.7
2011
end
238.4
Financial CF
87.6
EQUITY
LIQUIDITY
13
Balance sheet ratios
Balance sheet structure, 2010 vs. 2011 [EUR m]
2,264
Net debt: 813
2,370
Net debt: 489
B/S as of December 31, 2010 B/S as of December 31, 2011 • Equity and liquidity
decrease due to loss in 2011
• Net debt impacted by liquidity swing, on-balance financing of aircraft and stronger USD
Fixed assets
Other current assets
Liquid assets
Equity
Debt 89%
11%
11%
23%
66% Fixed assets
Other current assets
Liquid assets
Equity
Debt
64%
19%
17%
21%
79%
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AGENDA – Analysts‘ & Investors‘ meeting, 16 Mar. 2012 page
14
3 Topic 1 Review 2011
Topic 2 Overview 2012
18 Focusing the business model
22 Measurements to improve profitability
33 Outlook 2012
Macro-economic development 15
15
Euro
Economic situation across Europe affects demand for air travel
• The debt crisis has not come to an end and
continues to negatively impact the European economies
• Financial turbulences in the Eurozone lead to slow-down of economic growth
• European economy moving towards modest recession in 2012
• Economic growth expected
with 0.7% • Stable economy, but uncertain
business situation • Cautious consumer behavior • Assessment of the current
business situation cooled notably since mid 2011
Europe Germany
• Difficult financial situation • Unemployment high and still rising
• Danger of debt restructuring impends • Recession in 2012 by more than -3%
Spain
Portugal
• EU rescue package • Bailout strains Greek-German relations
Greece
• Recession (by approx. 1.5% in 2012) • Industrial production -5% in January
Italy
16
2012 remains a challenging year
16
• Encouraging signs from the US economy are offset by the persisting crisis in the eurozone.
• However, if the crisis in the eurozone cannot be solved permanently, IATA expects the international aviation industry to incur a loss.
• It is expected that the aviation industry will be facing additional costs from national air travel surcharges and the introduction of emissions trading.
SHAPE & SIZE PARTNERSHIP with ETIHAD
AIRWAYS
oneworld® Optimization of
airberlin`s network
2012
airberlin reacts to the challenges in 2012
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AGENDA – Analysts‘ & Investors‘ meeting, 16 Mar. 2012 page
17
3
15
Topic 1 Review 2011
Topic 2 Overview 2012
18 Focusing the business model
22 Measurements to improve profitability
33 Outlook 2012
Macro-economic development
18
Etihad and oneworld allow airberlin further strategic development towards a full service airline
18
airberlin strategic development – transformation process
HYBRID CARRIER FULL SERVICE AIRLINE
Cu
sto
mer
Ser
vice
Timeline
Global network (from America to Asia) alliance member
Global positioned frequent flyer program (topbonus)
Full service airline (lounge, priorities, etc.)
BUSINESS
LEISURE LOW COST
Stand-alone airline (cooperation with NIKI)
135 destinations (mainly Europe)
19
airberlin offers significant advantages to their guests
Network of airberlin, Etihad and oneworld
• Brand for business and leisure travelers • Attractive mix of leisure and business destinations • Three major hubs in Germany/Austria with access to America
and through the hub in Abu Dhabi to Asia, India and Australia • Huge variety of distribution channels (online, travel agencies,
TOPs, GDS)
• Integration Etihad and in oneworld with full compatibility
• Unique combination of attractive prices and full service • Business class product on long-haul services • Worldwide lounge access
NETWORK
FREQUENT FLYER PROGRAM
GUEST SERVICE
• Competitive cost structure
COST
20
New inventory and revenue management system enables cost advantages and revenue increase – reduction of complexity
20
Flight planning
Integrated flight planning with priority on profitability
Cost
Pricing
Intelligent Pricing through all channels and markets business segmentation
Revenue
Service to customer
Versatile services for different customer groups
Cost
RASK
Higher load and yields
Revenue
PROFITABILITY INCREASE
Business traveler
Leisure traveler
EVOLUTION
• Separated booking systems • Separated revenue management
systems
• Integrated view on business and leisure travelers
Network traveler
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AGENDA – Analysts‘ & Investors‘ meeting, 16 Mar. 2012 page
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3
15
Topic 1 Review 2011
Topic 2 Overview 2012
18 Focusing the business model
22 Measurements to improve profitability
33 Outlook 2012
Macro-economic development
22
Measures with important effects on revenue and profitability…
22
Process improve-
ment
Profitability improvement
Network reduction & productivity
Yield & Revenue
mgmt
Alliances
Cost initiatives
Mainte-nance
Yield optimization
Ancillaries
Points of Sale
Systems
1
1 1
3.1 Airport sourcing Late one-off bonuses TXL and DUS for
2011 identified (EUR 5.2 m)
3.6 Enhancing eCKI Contracts for reduction/ optimization
CUSS/ SSK in various airports finalized One-off payment regarding CUSS / SSK
agreed
3.8 PMI punctuality Awareness campaign for cockpit and
cabin crew started Meeting with ATC & GOPS PMI
conducted
3.7 Fuel saving Pilot Fuel Coaching campaign started Post flight analysis software to be installed
(belair and NIKI)
3.9 Compensation payments Implemented
1
1
1
3.3 Crew base concept Conceptual preparation for model for
“base jumper” discussed with crew planning
3.2 Onboard services Outsourcing customs warehouse in
discussion Module target decreased by EUR 2.0 m
3.5 Crew productivity / travel Production adjustment (FY -3%) not
completely compensated Required flexibility in flight program
decrease productivity target
1
1
3.11 IT Server solution for video conferencing
tool, contract signed with cost savings of EUR 0.1 m
3.13 Procurement / admin cost saving Increase of target for module by EUR 1.5 m Cost reduction through optimized use of
printers and copiers identified
3.12 Overhead The module responsibility changes to the
new CHO Planning on level SVP/EVP to be
prepared until 8 Mar 12
3.14 NIKI cost Additional airport marketing support
negotiated (EUR 0.4 m) Fuel measure to reduce cost index
implemented (EUR 0.7 m)
1
1
3.10 Future OCC Flexibility of current system analyzed Number and type of flight changes
analyzed Complexity costs evaluated
1
1
1
1
2
3
6
5
4
23
> €10 m
> €55 m
> €10 m
> €45 m
> €20 m
… add up to a total EBIT improvement of more than EUR 200 m in 2012
23
Process improve-
ment
Profitability Improvement
EUR
Network reduction & productivity
Yield & Revenue
mgmt
Alliances
Cost initiatives
Mainte-nance
EBIT values without effects from cost avoidance
> €70 m
1
2
3
4
5
6
24
EBIT improvement >EUR 200 m in 2012 with increasing impact in the course of the year
24
≈13% ≈ 22% ≈ 31% Share of Total ≈ 34%
2012
<200
Q4
>70
Q3
>60
Q2
>45
Q1
>25
Implementation of measures mainly in Q1 and Q2
Realization of effects predominantly in Q3 and Q4 (65%)
Description
Implementation
Realization
Effect in EUR m
25
> €70 m
Yield- and Revenue improvement measures
25
Examples
Systems Enhancing points of sale Yield & Ancillaries
1
Increase in market share in international markets with a high airberlin presence
Push principle for selected distribution channels in Offline-markets
Systematic opening up of new customer segments, distribution and sales channels, e.g. in Spain
Improvement of the sales platform to increase revenue in new business segments
Installation of new Revenue Mgmt System to efficiently manage availabilities & tariffs
Systems as enabler for yield- and revenue improvements
Optimize existing distribution channels and support additional opportunities, e.g. alliances
Increase of yield in significant business segments
Additional ancillary revenue through offering of new services to customers (e.g. piece-concept)
26
> €20 m
Our all-encompassing cooperation with Etihad Airways opens a new world of destinations
26
More attractive corporate contracts due to wider network
Increase passenger flows through code share
Joint sales and distribution channels
Joint frequent flyer program
Joint network with aligning hub traffic
Cabin crew training; joint simulators
Joint procurement
Airport sourcing
Etihad partnership
2
27
> €20 m
With oneworld airberlin enters into an attractive alliance
27
Codesharing and interlining with partners to multiply the number of airberlin destinations offered
Substantial increase of seat load factor
Enhancing attractiveness
by offering joint products, e.g round-the-world tickets
through linking the airberlin topbonus program to the frequent flyer programs of other partner airlines
Offer seamless travel to all customers on all oneworld flights
oneworld alliance
2
28
> €45 m
Cut of unprofitable routes and related capacities increases efficiency & allows fleet optimization
28
Reduction of fleet from 170 to 152 aircraft will decrease cost of aircraft ownership per block hour by more than 9%
Elimination of unprofitable network elements and optimization of fleet rotation
Increase of aircraft productivity by 7%
Optimize cycles to reduce crew travel and unproductive working hours
Focus on high frequency destinations
Network reduction
3
29
> €10 m
Maintenance savings through strategic procurement, improved planning and material logistics
29
Strategic procurement
Optimization of material- and demand management over the group
Improvement of logistic processes within supply chain management
Synergies from further integration of NIKI maintenance in airberlin group maintenance function
Additional revenues from maintenance services to third parties
Maintenance 4
30
> €55 m
100+ measures for consequent ongoing cost reduction
30
Crew productivity Airport sourcing Fuel
Scale effects through focus on less destinations
Improvement of contracts with handling agents and streamlining of service level agreements
Bundling of procurement and ground-handling
Mainly driven by network and fleet optimization
Reduction of flight overtime through optimized crew planning
Reduction of crew travel expenses through consequent planning of crew cycles and avoidance of proceedings
airberlin as industry benchmark
fuel consumption < 3.5 litres per 100 PKM
airberlin fleet with Ø age of 5.3 years
Ongoing initiatives for additional reduction of 31.5 thousand tons
weight reductions
optimized engine washes
use of more recent wind & temperature data
optimized speed
5
31
> €10 m
Process improvement further enhances profitability
31
Ground efficiency Bundling at stations Operational performance
Implementing single aircraft strategy
Closing and pooling together of stations (crew and maintenance)
Scale effects on airport conditions
Reduce personnel costs by placing additional self service counters at airports
Ground handling staff only for passengers where individual troubleshooting is required
Reduction of overhead cost
Increase punctuality
Quicker check-in process to increase customer satisfaction
Developing an integrated Operations Control Center
6
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AGENDA – Analysts‘ & Investors‘ meeting, 16 Mar. 2012 page
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3
15
Topic 1 Review 2011
Topic 2 Overview 2012
18 Focussing the business model
22 Measurements to improve profitability
33 Outlook 2012
Macro-economic development
33
Capacity development
33
Total seats [m]
>-5%
2012 2011
45.1
ASK [bn]
>-1.5%
2012 2011
62.2
Comments
• Sharp fleet reduction from 170 to 152 aircraft
• Capacity reduction in medium and short haul by
• Giving up unprofitable routes
• Alignment of aircraft utilization
• Focusing on high frequency
• Expansion in long haul by
• Increasing flights to Abu Dhabi
• Strengthening Berlin hub with flights to North America
<-7%
<-3%
>+6%
short haul 10.8
medium haul 39.0
long haul 12.3 17.4%
62.8%
19.8%
ASK development 2011 to 2012 [bn]
Target 2012
34
Topline development – yield and seat load factor improvement
34
Revenue/pax [EUR]
>+5%
2012 2011
119.8
Initiatives to increase yield
• Increase of base fare (“Eckpreis”) to all destinations
• Restrictive booking class steering drive higher yields (implementation of better RMS)
Price 2011
6.80
>+6.5%
2012 Ancillaries SLF
Revenue/ASK development [EUR ct] Seat load factor [%]
>+2%p.
2012 Shape
& Size
Effect
through
alliances &
partnerships
2011
78.2%
• Increase of fuel surcharge has been established in January further increase in March
• Cancellation of routes helps to improve yield and seat load factor
• Partnerships positively impact seat load factor
Target 2012
35
Cost development excluding fuel
35
• Cost development subject to USD development
• Structural cost increase will occur (e.g. distribution cost) but also higher yields will be generated
• Shape & Size will help to offset structural cost and price increases
broadly stable
2012 Structure Price Shape
& Size
2011
5.49
Total cost and fuel [EUR]
>-1%
2012 2011
3,413.2
649.9
618.5
475.4
1,669.4
Cost of a/c ownership
Other operating expenses
Personnel
Direct operating cost
[incl AT, excl. fuel]
Cost / ASK development [EUR]
Target 2012
36
Cost of aircraft ownership development
36
Cost of a/c ownership [EUR m] Aircraft [ #] BLH [hrs]
Narrow body BLH p.a. [hrs]
171
-18.0
2012 year end
2011 year end
-2.9%
2012
527.9
2011
543.9
>+5%
2012 2011
3.054
>-5%
2012 Shape & Size 2011
650
Wide body BLH p.a. [hrs]
>+7%
2012 2011
4.718
Target 2012
• Strongly depending on USD development ( lease rates)
• Next to cost reduction the increase in productivity is key for Shape & Size
• Revenue increase per aircraft bigger than 10%
37
Fuel hedging 2012
37
Fuel hedging profile and fuel price development, 2012 vs. 2011
0
10
20
30
40
50
60
70
80
90
100
Mar Feb Jan Dec Nov Oct Sep Aug Jul Jun May Apr
1) excl. differentials
Price1) development *[USD/t]
Hedging Rate 2011 (as of 03/09/2011)
Hedging Rate 2012 (as of 03/14/2012)
Mar Apr May
1,100
1,050
1,000
950
900
850
800
550
Dec Nov Oct Sep Aug Jul Jun Feb Jan
96 64 47 20
Hedging profile [%]
Hedge price 2011 Best case hedge price
Worst case hedge price
Market / Forward price Current Hedge price
* as of 14 Mar 2012 / 09 Mar 2011
38
Dollar hedging 2012
38
Dollar hedging profile and FX rate development, 2012 vs. 2011
0
10
20
30
40
50
60
70
80
90
100
Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan
FX rate development *[USD/EUR]
Hedging Rate 2011 (as of 03/09/2011)
Hedging Rate 2012 (as of 03/14/2012)
1.42
1.40
1.38
1.36
1.34
1.32
1.30
Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan
100
* as of 14 Mar 2012 / 09 Mar 2011
77 50 43
Hedging profile [%]
Hedge rate 2011
Market / Forward rate
Worst case hedge rate
Best case hedge rate
Current Hedge rate
39
Fuel and USD sensitivity
39
Fuel / dollar sensitivity
Fuel costs per quarter 2011 vs. 2012 [EUR m]
>-3%
2012 2011
1.45
Fuel consumption / ASK [kg]
Effective Fuel Price/ton = $1.081 incl. differentials [$1.013 excl. differentials]; effective EUR/USD = 1.373
Unhedged price dollar [EUR/USD]
Fuel price unhedged quantity [USD/t]
1.300 1.375 1.400
139.9
82.3
45.3
136.1
59.5
46.0
134.1
47.6
46.3
1030
1200
1000
-2%
2012 Structure Shape
& Size
2011
23.36
255321
277196
>2% >2%
>5% >15%
Q4 Q3 Q2 Q1
fuel 2012
fuel 2011
Fuel consumption [mt]
Target 2012
40
Strong earning improvement envisaged
Operational performance
Capacity
• Strong fleet reduction (10% of aircraft)
• Reduction in selected non-strategic markets in Europe
• Moderate increase in long haul business
Capacity utilization and
income
• Increasing load factor through network reduction, improved sales platform and partnerships
Result
Revenue
• Growth in revenue through yield and SLF growth expected ( Q1 trends were satisfactory)
Expenses
• Cost per ASK ex fuel will be kept stable; structural cost increases will be offset through Shape & Size
Result
• Improvement in profitability
Balance sheet
Balance sheet
• Equity and liquidity stabilized through Etihad investment
• Deleveraging is the key objective for 2012; initiatives are on the way
Strong earnings improvement targeted for 2012, Shape & Size showing positive effects in the 1st Quarter
€ A L
Target 2012