Brussels Airlines Financial Results 2009

[brussels airlines]

Although there has been no official communication yet, Brussels Airlines has filed his Annual Report 2009 at the National Bank of Belgium. Link (Dutch version): http://bcc.nbb.be/BCCIA0101/WEB/actions ... 0100525019

BrusselsAirlinesFinancialResults2010.pdf

Brussels Airlines Jaarrekening 2010 - Financial Results 2010

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Summary:
*Loss of almost 40 million euro (39.812.145 exactly)
*Important events: -24 June 2009: Lufthansa buys 45% of the shares of SN
-25 October 2009: switch from b.privilege to Miles&More
-9 Decermber 2009: Brussels Airlines enters Star Alliance
-2010: expansion Africa by adding a 5th A330 & start-up of regional carrier in DRC Congo
*Important facts: -On 31 December 2009, the Brussels Airlines' fleet consisted of 51 aircrafts. (6 BAe146 and 1 B737 owned / 14 RJ85;12 RJ100; 4 A319; 4 A330 in operational lease)
-Passengers on Brussels Airlines operated flights in 2009: 4.6 million (-0,5 million)
-Passengers on African flights: 0.5 million
-Staff: pilots -> 483 (-12) / cabin crew -> 849 (-13) / other -> 1319 (+3) / TOT:2651(-22)

*Operational result: -73.1 million (versus +4,7 million in 2008) =are daily operations of SN
*Financial result: +25.8 million (versus -6.8 million in 2008) =e.g. fuel hedging, interest rates, etc.
*Exceptional result: +7.5 million = e.g. changes in currencies, etc.
-->This results in the total loss of 39.8 million euro for 2009

*Brussels Airlines expects to be profitable again in 2010.

[RoMax]

Not really unexpected numbers. Brussels Airlines said that the loss will be bigger than in 2008. And this is again a good reason for LH to take over SN in 2011. Brussels Airlines probably will be profitable in 2010, so their value will rise and normally the profit will be even bigger in 2011 so the value of SN in 2012 will be again higher and so on.

[NCB]

I think that SN did a good job at containing the damage because the operational result is not so good.

I will be very surprised if SN will make a profit in 2010 because of the vulcanic ash problems, the very tough winter that made it spend alot of money in delays, cancellations and operational costs.
The 5th A333 will add to those issues as it costs money to prepare the aircraft for service and it takes time to make the new routes profitable.

Is it not possible to reshuffle the schedule and cut loss-making routes and frequencies, to take out a few more B737 and RJ's, so that they can be replaced by an additional A333? This would reduce cost and increase revenue.

[fretn]

You have to spend money, in order to make money... SN will do just fine! (Korongo)

[airbuske]

Brussels Airlines gokt verkeerd op kerosineprijs en boekt onverwacht verlies van 40 miljoen in 2009

Only in Dutch.

Brussels Airlines was thinking that the price of kerosine would rise but the price decreased, they lost 80 million!

The ash cloud will cost Brussels Airlines 10 million.

For 2010 they are thinking about break-even.

[RoMax]

Brussels Airlines gokt verkeerd op kerosineprijs en boekt onverwacht verlies van 40 miljoen in 2009

Only in Dutch.

Brussels Airlines was thinking that the price of kerosine would rise but the price decreased, they lost 80 million!

The ash cloud will cost Brussels Airlines 10 million.

For 2010 they are thinking about break-even.

Because of this Air France/KLM also made a enormous los in 2009. Hedge contracts are very good when the kerosine price will rise in the future, but it will cost you a lot of money if the kerosine price decreases like it did because of the crisis.

The current cash position of SN is around 300 million Euros.

Before the ash cloud SN was operating 3-4% above break even (so they made profit) but they lost indeed 10 million with the ash cloud and the impact of the low Euro is a big 20 million. But they think/hope that this can chance later in the year.
SN said that they have still a big buffer and that they don't really need to worry about the lost in 2009.

[NCB]

http://www.iata.org/whatwedo/economics/ ... pment.aspx

What is weird is that the fuel prices have increased considerably over the past year. According to the above link, fuel prices quoted in USD have increased by 25% over the past year.
The euro has dropped dramatically instead.

Something isn't adding up in these reports.

Now we have a price tag for the Star Alliance membership and it seems that it is not cheap at all.

[tolipanebas]

What is weird is that the fuel prices have increased considerably over the past year. According to the above link, fuel prices quoted in USD have increased by 25% over the past year.
The euro has dropped dramatically instead.
Something isn't adding up in these reports..

I don't see what's contradictory... care to elaborate?

Now we have a price tag for the Star Alliance membership and it seems that it is not cheap at all
..

it's not just the STAR membership, it is also for the entry into M&M program.

A few months ago, SN said STAR membership would cost around 7M euro, so the rest must be for the transition from privilege to M&M.

[NCB]

Nice to know the figures, thanks.

The contradiction is that fuel prices did increase during all of 2009 at about 20%, so I don't know why L'echo and De Tijd are reporting that "SN lost money on fuel hedges because the fuel prices decreased", which is clearly a false statement in light of all the evidence.

I was told that revenues decreased which was the main cause of the increased loss?

[tolipanebas]

The contradiction is that fuel prices did increase during all of 2009 at about 20%, so I don't know why L'echo and De Tijd are reporting that "SN lost money on fuel hedges because the fuel prices decreased", which is clearly a false statement in light of all the evidence.

In case of losses on hedges in 2009 as reported here, you should compare the actual fuel price of 2009 against those when the hedges were first signed (in 2008 for instance)!

Look at the graphs again: if SN hedged their fuel for mid-2009 at the going-rates of mid-2008, than that's a HUGE loss indeed. In short: you're looking at the wrong part of the graph to compare prices to!

[NCB]

Having just taken a look at the balance sheet it is clear that: revenues declined 16% by 163 million to 849 million while costs only reduced by 8% or 85 million to 922 million.

Fuel hedges? No, decline in revenues is IMO the main cause of the loss and newspapers are selling hot air.

if SN hedged their fuel for mid-2009 at the going-rates of mid-2008, than that's a HUGE loss indeed. In short: you're looking at the wrong part of the graph to compare prices to!

I don't think that that happened, the CEO's are not so stupid.
Most hedges go on a less than 6 months scale. Unless you are a complete donkey you do not hedge significant amounts 12 months ahead, especially at record high prices.

[tolipanebas]

I don't think that that happened, the CEO's are not so stupid.
Most hedges go on a 6 months scale, unless you are a complete donkey you do not hedge 12 months ahead.

If you take a look at the graphs you've provided, fuel prices throughout 2009 were NEVER higher than fuelprices prior October 2008. That means all of the 2008 hedges (apart from those signed off post OCT) maturing in 2009 (and thus also accounted for in that year) were indeed at a loss, regardless their horizon, just as stated. Even a 6 month period will have yielded a huge loss. Image SN having hedged february 2009 fuel at august 2008 levels!!!!

BTW, I don't know if you realise, but the remark about the unfavourable hedges isn't from the newspapers, its straight from the AUDITED financial report SN deposited to the NBB. Are you really seriously considering the people signing this off are deliberately telling lies then? Or is it rather you just looked at the wrong side of the graph and failed to understand reality, thus made up your own version of it? From some other discussions we've had, I know what to pick...

[Air Key West]

I don't think the newspapers are selling hot air. L'Echo and De Tijd which reported the news are known as reliable sources of information. Indeed, b.air hegded fuel in mid-2008 for probably most of 2009. In the summer of 2008, oil prices (I'm not saying jet fuel prices, but both are linked) were around 150 dollars a barrel and some analysts predicted the price would go up to 200 dollars by the end of the year (2008).
B.Air management probably followed these analysts, panicked (fear and panic are never good counsellors) and hegded up to 70% of their fuel for the coming months and into 2009.
Now, if you have a look at oil prices, you will see they tend to move in cycles and not consistently in one direction. In other words, like in the song "Spinning wheel" by the band Blood, Sweat and Tears, you have to remember this : "spinning wheel must go round, what goes up, must come down".
When oil can be considered being at the bottom of a cycle, it is wise to hedge. When oil can be considered at the top of a cycle (as it was in 2008, unlike what some - not all - analyst said), it is wise not to hedge or to hedge at the most 50 % of your fuel needs and not 70 % like b.air did. This clearly denotes a panic, not a reasoned decision. Or in other words, just one more management mistake by b.air's management team.
Apart from that, if you take into consideration the 15 million paid to join Star Alliance and Miles-and-More, which is a one-off expense, the financial result is not bad. Imagine what the result would have been if b.air management had given in to panic in 2008 over fuel prices and had only hedged let us say 50 % of the fuel needed.

[NCB]

According to the report, indeed 2008 fueld hedges seem to have contributed to the loss but the main driver seems to be the loss in revenue caused by lower traffic and yields, itself caused by the crisis.

So basically, unless SN had hedged 100% of its 2009 fuel at 95$ in a panic reaction, resulting in 30% higher fuel prices throughout the year and increased costs by 73 million, which rather does not make sense, the assumption is factually inaccurate. It is not in any airline's habits to hedge more than 50% of fuel.

I have been told by people in the commercial department that revenues were down, so I took their word for it and it seems that they were not selling me hot air.

Tolipanebas, you are a j*rk, just look between the posts how you escalate the debate for nothing.
Get yourself a life man.

[RoMax]

According to the report, indeed 2008 fueld hedges seem to have contributed to the loss but the main driver seems to be the loss in revenue caused by lower traffic and yields, itself caused by the crisis.

So basically, unless SN had hedged 100% of its 2009 fuel at 95$ in a panic reaction, resulting in 30% higher fuel prices throughout the year and increased costs by 73 million, which rather does not make sense, the assumption is factually inaccurate. It is not in any airline's habits to hedge more than 50% of fuel.

I have been told by people in the commercial department that revenues were down, so I took their word for it and it seems that they were not selling me hot air.

Tolipanebas, you are a j*rk, just look between the posts how you escalate the debate for nothing.
Get yourself a life man.

Revenues that went down in 2009 were indeed a big reason for the loss. But the loss of about 80 million Euro because of the hedge contract was the biggest reason for their loss.

[NCB]

So the hedge loss was 80 million euro.
In such case it makes sense to say that the fuel hedge was the main cause of losses.

Thank you for clearing that up without all the hystery attached to it.

Then that would point to a serious mistake by top management.
80 million euro's, hedging 100% of fuel at more than 30% of market price.

For that small fortune, you can buy a small piece of land in the desert of Kuwait or Iraq, build a small well, build a small-sized refinery, operate a small-sized tanker and start producing your own fuel.

[tolipanebas]

unless SN had hedged 100% of its 2009 fuel at 95$ in a panic reaction, resulting in 30% higher fuel prices throughout the year and increased costs by 73 million, which rather does not make sense, the assumption is factually inaccurate. It is not in any airline's habits to hedge more than 50% of fuel...

I quote:

"indekking van brandstofprijzen:
... een totaal ingedekt volume van 72% over het jaar 2009. Dit laatste is in overeenkomst met de regel van 50 tot 80% indekking van het brandstofvolume zoals opgelegd door het Auditcomite, rekening houdend met de beschikbare kredietlijnen."

As so often, many of your assumptions, just don't match with verifiable reality.

[RoMax]

So the hedge loss was 80 million euro.
In such case it makes sense to say that the fuel hedge was the main cause of losses.

Thank you for clearing that up without all the hystery attached to it.

Then that would point to a serious mistake by top management.
80 million euro's, hedging 100% of fuel at more than 30% of market price.

For that small fortune, you can buy a small piece of land in the desert of Kuwait or Iraq, build a small well, build a small-sized refinery, operate a small-sized tanker and start producing your own fuel.

Mid 2008 when they signed the contract it was predicted that the kerosine price would rise enormiously the comming months, so they signed a big hedge contract for 70% of their needed fuel. Many airlines did this, but it was a very big mistake to do it for 70% of their fuel. Now Bernard Gustin says that this was a very big mistake to sign a hedge contract for 70% of their fuel. 50% is now their absolutly maximum (like LH do this). Air France/KLM made the same mistake as SN and they lost 630 million because of their hedge contracts. Also other airlines lost a lot of money, but AF/KLM is the worst case I think. This are kind of panic reactions made by many companys. You need to relay on the specialists but not completly because than this can happen.

[Air Key West]

NCB, you write that "it is not in any airline's habits to hedge more than 50% of fuel.". Well, apparently, b.air hedged 70 %.
And if people at b.air's commercial dept tell you that revenue went down, of course, that is true. And if they had added that this is the main cause for the 40 M loss, they would only be defending their managers team. What else can you expect ?
Of course, the loss in revenue because of the financial and economic crises is also a reason for the loss, but not the only reason, whereas you seem to presume that it is the only cause for the loss.
To all members on this forum, I would like to say : let's look at the positive side of the loss : 40 M minus
15 M (one-off expense for joing Star and M&M) = 25 million loss. Not bad in a difficult year (2009). If management had not waited three years to add a fifth A330 to the fleet and this aircraft had already been flying in 2009 bringing in serious money from the money-making African network, there might even have been a break-even. But waiting for three years to add an aircraft to your fleet of which you know it will bring in good money is just one more mistake by management.

[tolipanebas]

Mid 2008 when they signed the contract it was predicted that the kerosine price would rise enormiously the comming months, so they signed a big hedge contract for 70% of their needed fuel. Many airlines did this, but it was a very big mistake to do it for 70% of their fuel. Now Bernard Gustin says that this was a very big mistake to sign a hedge contract for 70% of their fuel. 50% is now their absolutly maximum (like LH do this).

Hindsight is always 20/20, like they say.

In summer 2008, many were predicting oil prices of 200 dollars (and more) a barrel for the second half of 2008, so many airlines with ample credit lines decided to hedge as much fuel as possible for the winter of 2009, knowing prices could explode then (if the winter would be extremely cold in North America).

LH is an odd case really: they hedged massively too in 2008, but their hedging fund went bust in the financial crisis, so they got away from under their hedges. Sometimes LH isn't better then the rest, but just more lucky really. But then you know what they say; luck is always with the winners.