Brussels Airlines future and financial perspective

[sn26567]

https://www.aviation24.be/airlines_press_r ... -airlines/

January doesn't seem to be a big month for many European airlines, I see a lot of status-quo's (I see it like that if it's between -1% to +1%) or slightly better (or worse).

If SN grows only 4.6% when BRU grows 13.5%, it means that SN is well behind the general growth at BRU, mainly due to the LCCs. Is that a new trend after the superb performance of 2014?

[nordikcam]

https://www.aviation24.be/airlines_press_r ... -airlines/

January doesn't seem to be a big month for many European airlines, I see a lot of status-quo's (I see it like that if it's between -1% to +1%) or slightly better (or worse).

If SN grows only 4.6% when BRU grows 13.5%, it means that SN is well behind the general growth at BRU, mainly due to the LCCs. Is that a new trend after the superb performance of 2014?

FR was not flying to and from BRU in january 2014...no ?

[airbuske]

FR was not flying to and from BRU in january 2014...no ?

Ek was also not flying to and from BRU in january 2014.

I think the growth in January and also february will be from carriers who were
not flying to and from bru last year.

[RoMax]

Contrary to the second half of 2014, January was a month of significant capacity reductions in long haul (as I expected from the published data and confirmed by Tolipanebas) having a 'negative' impact on SN's overall traffic results (which are still not bad btw, with 4.6%). This is not the case for e.g. Vueling, Ryanair, Emirates, etc. with capacity to/from BRU that was not there last year (Vueling and Ryanair downgraded of course a bit compared to summer, for the whole winter season, but still there is much more capacity than last year in January, especially Ryanair and Emirates).

It will get more interesting as from March and April.

[convair]

It looks like they are (or were)also decreasing JFK, Moscow and sometimes Afi frequencies.

[Flanker2]

The most important figure here is RPK, which is a direct measure of revenue and indirectly of margins.
Revenue Passenger-kilometers has decreased by -3.2%.

This negative number despite an increase in pax is not good, as SN is facing higher costs owed to a larger amount of pax, against decreasing total revenues supposing the same or lower yields.
Freight has also decreased.

Let's see if Tolip has it right and it's only a temporary setback owed to temporary capacity reductions.
But I think that like I forecasted, we will see SN's growth stabilise this year, with a weak Euro to disturb them and cheap oil to give them enough oxygen to turn green, if they haven't hedged too much.
Ryanair has supposedly hedged at 90+ USD but they're still forecasting 80% higher earnings versus 2014.

[Inquirer]

The most important figure here is RPK, which is a direct measure of revenue and indirectly of margins.

Isn't RPK simply the number of occupied seats times their distance flown, then?

You have a whole comment about RPK, yet by its own definition and despite the presence of the word 'revenue' in it, RPK -which is more commonly known as RSK, btw- tells you nothing about the revenues generated from those seats at all and only gives you an idea about their occupancy rate by calculating a load factor, something which was given by them too I see and apparently hardly moved due to the fact their ASK number followed nicely in the footsteps of the RPK (aka RSK) number.

I agree RPK (aka RSK) has a confusing name, as it leads to think it's somehow giving you the revenue per seat-kilometre (RASK): it really doesn't; it merely gives you the number of occupied seats times their distance flown and should much better be re-named OSK (occupied seat kilometres) or something unambiguous.

RPK (or RSK) stands to ASK through just the loadfactor, just like RASK stands to CASK through the operating margin. You seem to have mixed up RSK with RASK for a second when you commented on its evolution, so please reconsider with this in mind, since what you wrote above doesn't make much sense any longer.

[RoMax]

Indeed, RPK doesn't tell you anything about revenue. RPK and ASK are purely measurements for demand (=actual pax.) and capacity. And indeed, pax. load factor is simply calculated as (RPK/ASK)*100
The reason it's called "Revenue Passenger Kilometres" is because this only includes "revenue passengers", meaning paying passengers. This excludes e.g. employees flying for free.

This negative number despite an increase in pax is not good, as SN is facing higher costs owed to a larger amount of pax, against decreasing total revenues supposing the same or lower yields.

No, the only conclusion you can draw from this is that despite the increase in passenger numbers, they flew on average shorter sectors. Combine that with a decrease in ASK (and the note in the press release that pax numbers in Europe increased with more than 8%) and you end up with the conclusion that these negative ASK/RPK numbers are completely caused by the long haul network (which have a bigger impact on these numbers because of their longer sector lengths).

And yes less long haul pax probably also means lower average yield for the complete company, but as that seems to be largely the result of a capacity adjustment, that doesn't say anything about margins. Also several airlines now see a status-quo or even decrease in yield and still an increase in operational margins, especially in the US (caused by the drop in fuel prices, despite the fuel hedging there is still some impact which can already be seen).

[Inquirer]

Interesting remark about their European growth.
I admit I first missed that (I only looked at the graphs with the numbers, this must have been a professional habit of mine).

An 8% growth in January vs the same month last year, which was in itself also one of very significant growth, means they show for the second time in a row now a continued growth path YTD (after the month of December, since December 2013 was actually the first time they grew so spectacularly), so my first very timid conclusion and prediction for this year would be that they will indeed manage to continue growing quite significantly this year as well, especially if indeed their fleet is going to expand further as well?

[sean1982]

Yet growth for the sake of growth doesnt mean anything. Ask anybody who doesnt work for SN but IN the industry if they are willing to jump ship to SN and the answer will be: no, I will not take that risk.

[RoMax]

Yet growth for the sake of growth doesnt mean anything. Ask anybody who doesnt work for SN but IN the industry if they are willing to jump ship to SN and the answer will be: no, I will not take that risk.

Yet nobody can judge in that way without knowing the financial details of SN and the evolution compared to their worst years (2011-2013). Only thing we know is that they still made a loss in 2014 as expected and they plan break-even this year.

[KriVa]

Yet growth for the sake of growth doesnt mean anything. Ask anybody who doesnt work for SN but IN the industry if they are willing to jump ship to SN and the answer will be: no, I will not take that risk.

I actually know quite a few people who have made that very decision. On quite some levels within the company(-ies) too...
Every company has advantages and disadvantages. Putting them against each other is a decision everybody needs to make for themselves.

[Flanker2]

RPK is a direct measure of revenues at constant yields. What are you talking about that it's not a direct measure of revenue. Of course it is!! If the yield per RPK is the same, an increase in RPK will result in higher revenue.
In this case SN achieved lower RPK at higher pax or lower yields. That' s a double negative, in addition to higher costs.

Don't try to explain things that you don't understand yourselves...

[teach]

In this case SN achieved lower RPK at higher pax or lower yields. That' s a double negative, in addition to higher costs.

No, it means SN transported fewer people on its long haul network, due to lower capacity caused by aircraft being taken out of service for heavy maintenance in the low season. That is literally all that means. It says nothing about yields. It says nothing about profitability.

[Inquirer]

Dear flanker2,

RPK = TOTAL PAX x TOTAL DISTANCE
So if RPK dropped despite an increase in passengers, it's because they flew less distance.
(note how the ASK figure tracks the evolution of the RPK figure, so this gives away you are looking at capacity steering in action. A lower ASK means less costs, not more, like you claim, but if I need to pinpoint EVERY error in your posts, we better take the rest of the week off then)


It's not the first time I notice you revert to interpret operational figures in the weirdest possible way just to match a certain predetermined opinion of yours, rather than use these shared figures to make an openminded opinion: the misfortune for you is that your predetermined opinion -although extremely vested in your mind- simply does not match with reality at all, hence you running into ever more trouble making sense of the figures you see them posts month after month, for the second year in a row now even.

Still remember how you were predicting a massive decline in passengers around this period last year?
Not much came from that, did it, much to your -and I I admit also mine- surprise?
If on top, then announce a significant improvement to their financial results, basically it will throw out even your last line of defence, i.e. that they must be losing extra money doing exactly the oposite of what you said should/would happen.
In light on the circumstantial evidence:
1_ they keep doing it for a second round this year
2_ competitors have as good as backed off
3_ they gave intermediate (albeit non-binding) guidance as to them doing better financially
4_ their operational costs must be dropping since the end of last year thanks to the dive in oil prices
I'd say this is fairly likely to happen indeed, so allow me to say that not only does your analysis not exactly have a very good track record of being anywhere near reality in hindsight; the outlook isn't particularly positive towards helping you lift your credibility a bit either if you absolutely want to stick to the signature negative conjecture of yours nevertheless.

[sean1982]

Yet growth for the sake of growth doesnt mean anything. Ask anybody who doesnt work for SN but IN the industry if they are willing to jump ship to SN and the answer will be: no, I will not take that risk.

I actually know quite a few people who have made that very decision. On quite some levels within the company(-ies) too...
Every company has advantages and disadvantages. Putting them against each other is a decision everybody needs to make for themselves.

Yes so do I, because they ran out of temporary contracts at JAF and they didn't have another choice than to start doing temporary contracts at SN

[Inquirer]

Yet growth for the sake of growth doesnt mean anything. Ask anybody who doesnt work for SN but IN the industry if they are willing to jump ship to SN and the answer will be: no, I will not take that risk.

I actually know quite a few people who have made that very decision. On quite some levels within the company(-ies) too...
Every company has advantages and disadvantages. Putting them against each other is a decision everybody needs to make for themselves.

Yes so do I, because they ran out of temporary contracts at JAF and they didn't have another choice than to start doing temporary contracts at SN

Well maybe all these burger flipper contracts which are quickly becoming the reference in aviation it seems, can much better be discussed at the appropriate topic which I started yesterday?

https://www.aviation24.be/forums/viewtopic.php?f=7&t=55657

Thank you.

[sean1982]

you not working in the industry I can, once again, say that as an aviation enthusiast, even though how far you think your aviation wisdom reaches, you dont know what you're talking about.

[tolipanebas]

FWIW, Inquirer:
SN's financial results for 2014 will be announced on March 12th, together with the rest of the Lufthansa group, and yes indeed: you seem to be able to have no problem predicting events before they unfold.

[Inquirer]

you not working in the industry I can, once again, say that as an aviation enthusiast, even though how far you think your aviation wisdom reaches, you dont know what you're talking about.

Which is exactly why I invite you to the topic started: please feel free to contribute more widely to it than you have done so far.

As a teaser maybe, allow me to briefly point out that if the massive cost handicap you signal is indeed present also on your salary check, I'd be quite worried in your place given the bloomberg article I linked to also talks about recent practices used by Norwegian which come done to importing South-East Asian crew under their home country's labour conditions and salaries.
Since your airline has ambitions to fly to the USA too, it's a safe bet to say that they will be keeping a very close eye on how Norwegian is going to get away with exactly what they are trying to do (or not) on their long haul flights and it is sure to copy their method if it gets validated: something which I am not so sure you will very much like, the day you are replaced by a hardworking and extremely motivated Thai boy/girl who has no problem whatsoever with taking over your duties for a fraction of your salary, maybe not just on the ^new transatlantic flights, but also on the existing european flights: after all, why stop half way, right?

It's definitely an interesting concept for shareholders, most certainly also those of Ryanair, if indeed their company can slash the salary costs by such large percentage numbers as these methods used by Norwegian theoretically do allow them to do.