Brussels Airlines future and financial perspective

[ezis_bis]

I was curious about something

So the last stats show SN has about +19% more passengers
BRU as an airport in total is at +17%

With the arrival of Emirates and Ryanair, both thus at +100%, somebody is having his cake eaten
BRU airport said connections are way up due to being a Star Alliance up, so perhaps we can exclude those guys
But then who is it?
The non-alligned carriers? The other alliance carriers? Maybe Easy or Vueling or having a hard time?

Just wondering..

[Passenger]

I quote Tolipanebas from over 3 years ago...

I quote flanker from 1,5 years ago:

Tolipanebas, my friend. You're forgetting who you're talking to. The SN crews are driven to their "luxurious 5 star hotel compound"(smell the sarcasm) 10 miles out of the city in armored GMC trucks (more sarcasm) presidentially escorted by 3 armored vehicles full with elite soldiers armed to their teeth (ultra-sarcasm). The alternative was the cheaper (hum hum) western-style 5 star (a real 5-star) Memling hotel 4 blocks from the airport where they used to stay safely since 30 years, even in worse times. You can make some people believe anything, but not me. I wouldn't be so sure that the whole "escort plus accommodation" combo would cost a dime more than crew accommodation in JFK. So what's your next excuse? Keep them coming.

This hillarious post (and a hit on Youtube meanwhile) was followed by this reply:

I am talking to the self declared expert who's operational knowledge is limited to what he can find online and in this case managed to mix up the location of the city airport of Ndolo with the international airport of Ndjili in Kinshasa. Google Maps sure is confusing if you haven't been there yourself, it's it?

Extract from viewtopic.php?f=7&t=49794&p=276535

[RTM]

Guys (girls...?) please...

I was curious about something

So the last stats show SN has about +19% more passengers
BRU as an airport in total is at +17%

With the arrival of Emirates and Ryanair, both thus at +100%, somebody is having his cake eaten
BRU airport said connections are way up due to being a Star Alliance up, so perhaps we can exclude those guys
But then who is it?
The non-alligned carriers? The other alliance carriers? Maybe Easy or Vueling or having a hard time?

Just wondering..

I don't think the 19% of SN accounts for the entire 17% of BRU. So there is some room there. But yes, someone is probably also loosing out.

[ezis_bis]

I don't think the 19% of SN accounts for the entire 17% of BRU.

Of course not
I also do not think SN is all of BRU's growth
But (according to the statistics) someone is clearly losing out here

[Pocahontas]

EBCI is

[convair]

OMG!
Guys, I think you should review your maths!
The 17% BRU growth is the result (weighted average) of each individual airline growth and could be reached even if all airlines experienced a growth!
What is sure is that some have experienced a higher growth, some a lower growth than the 17%. A 100% growth for an airline that had 100 pax last year is an additional 100 pax, which weighs very little in the 17%.
What is indeed changing is the share of each airline in the total (it probably changes every month), but it doesn't necessarily means any of them is loosing pax over last year.
But of course the fact that some airlines MAY have lost pax over last year cannot be excluded.

[DannyVDB]

It is not sure someone is losing. Don't forget BRU is growing 17% on average.

What we know is that the growth is around 335.000 additional pax.
- SN has grown 109.000
- I assume that Ryanair has around 160.000 pax in September, in total (maybe more)

That still leaves 66.000 additional pax with other airlines, probably part of that is with Vueling, Jetaifly ...

I think it is possible that Qatar and Ethiad are losing some of their pax to Emirates and I assume a lot of airlines will have only very low growth or even slight decreases ...

Maybe also some airlines left as compared to last year (?)

But I think that there are no airlines at BRU that are really losing a lot ...

Just my 2 cents,
Danny

[DannyVDB]

Hi Convair,
Seems we posted more or less the same message at the same time ...
Danny

[Flanker2]

Danny and Convair are right.

SN has 6 to 7 million pax a year, BRU should be about 21 million this year.
So SN only represents about 30% of BRU's entire market share, meaning that all the other players at BRU representing the remaining 70% would have had to grow by at least 15-16% for BRU to grow by 17%.

Are other players losing out? Not really the ones who you may think of.
FR, VY and EK together now represent about 16% at BRU.
So if they are flying 100% full, they could be accounting for the entire growth of the remaining 70% at BRU.

However, I don't see VY flying full, and even EK and FR will be flying at around 90%.


This means that the growth excluding SN, FR, EK and VY was probably around 5%-10% in September.
Nobody is losing out, and if anyone is, I anticipate that it's 9W.

While SN could be the having a good month of traffic growth versus last year, the big winners in terms of traffic are the newcomers FR, VY, EK, as they are going from 0% LF to 80-90% .

[convair]

Hi Danny,
I beat you by 3 minutes...only!

[Passenger]

While SN could be the having a good month of traffic growth versus last year, the big winners in terms of traffic are the newcomers FR, VY, EK, as they are going from 0% LF to 80-90% .

I know that it's difficult for you to admit that Brussels Airlines has progressed, but they really did.

Nice try to call load factors for new routes a progress "from 0% to 80-90%". Is that Flanker2 Mathematics version 1.1? In real life, a comparison can only be done with real figures. When there are no figures to compare with, we use "N/A Not Applicable" in real mathematics. With Flanker2 Mathematics version 1.1, a LF of 30% on a new route after one year is not "terrible", but "a good progress of +30%".

Anyway, here are the figures for Brussels Airlines, September 2014:

Passengers : +19,5%
Available Seat Kms : +5,8%
Revenue Pax-Kms : +14,2%
Freight Ton-Kms : +8,5%
Overal Load Factor : +4,9%
Passenger Load Factor : +5,7%

Clear overview, copy/pasted from here:
http://www.luchtvaartnieuws.nl/nieuws/c ... -houdt-aan

[Flanker2]

I know that it's difficult for you to admit that Brussels Airlines has progressed, but they really did.

Nice try to call load factors for new routes a progress "from 0% to 80-90%". Is that Flanker2 Mathematics version 1.1? In real life, a comparison can only be done with real figures. When there are no figures to compare with, we use "N/A Not Applicable" in real mathematics. With Flanker2 Mathematics version 1.1, a LF of 30% on a new route after one year is not "terrible", but "a good progress of +30%".

Well sorry I do not find any criticism in my post.
If you see SN-bashing there, you need help.

BRU is experiencing artificial growth.
The average intra-Europe RPK growth was 2.3% in September.
As far as I know, they didn't find gold or oil in Brussels, so BRU's larger demand comes from cheaper tickets.

SN have a competent yield department (or so I hope), and if carrying more pax at cheaper fares was more profitable, they would have done it in 2010, 2011, 2012, 2013, and more successfully in absence of FR and VY. This would have kept FR and VY out of their market and they could have turned a profit.

Or are you saying that the yield department at SN was so incompetent over the past years, that they were selling tickets too expensive and that they have rediscovered that their own market has a lower sweet spot thanks to FR and VY?

I'm not sure which explanation is better.

Whether you like it or not, no matter how you look at it, FR, U2 and VY are far better in this business than SN. In my opinion, SN doesn't have any chance of survival in this market unless they can change significantly enough to make them at least as competitive as those airlines. We all know that that is not going to happen.

Knowing that, why would I bash SN? It's just painful to see the SN fanboys continuing and continuing to hope for that miracle while overreacting to every single post of other people who are just making educated observations.

[convair]

BRU is experiencing artificial growth.
The average intra-Europe RPK growth was 2.3% in September.

I believe you are drawing a too fast conclusion here Flanker. I don't understand either why BRU is growing so fast. Could it be that it was lagging abnormally behind until this year?

[sn26567]

Another factor in the growth of Brussels Airport that seems to be overlooked in the above comments is the growth in transit passengers: +33%. This growth is probably mainly in favour of Star Alliance companies.

[Flanker2]

Even if BRU was lagging behind somehow, it doesn't explain this big a growth in absence of economical growth.
The Belgian economy is mostly stagnating this year, as are the economies of neighboring countries.

It also wouldn't explain how SN could still remain in the red for 2014 (as per recent reporting) while experiencing this kind of growth: if SN has a 10%+ overall Year/Year average increase in pax at the same yields, it would have pushed revenues up easily by 80-100 millions, at only a small increase in cost of about 10-20 millions, pushing them easily into 30-40 million of profits.
Gustin himself said that they're targetting a decrease in losses for 2014, and that's in August-September when bookings for September were already at an advanced stage.

Transit traffic is a very small portion in the entire equation at BRU... not many connecting flights.
How many pax is its growth relative to the entire traffic's growth?
Also, at the end of the day, transit pax make the additional stop through BRU because it's cheaper that way (with the exception of Ebola traffic), ie they're low-yielding.

[convair]

Even if BRU was lagging behind somehow, it doesn't explain this big a growth in absence of economical growth.
The Belgian economy is mostly stagnating this year, as are the economies of neighboring countries.

OK, but how do YOU explain it then? You talk about artificial growth; do you mean you don't believe the figures then?

If I remember correctly, several industry professionals stated that they see an interesting growth potential in BRU.

[Inquirer]

I don't know about your eduction flanker, but your analysis is missing quite a few important elements, not surprisingly leading you to an explanation which mainly confirms your old beliefs you keep repeating over and over again, rather than lead to updated insights and foward looking guidance.

I think we all know a financial result is the difference between revenues on one side and costs on the other, yet when you take a hit at their revenue management, you are talking as if only the revenues side of their business has changed, something which isn't very likely I would think.

I read here they've lowered their costs by more than 10% vs last year, which is of course an absolute must if you want to offer lower fares (and attract more passengers from it). As such, what is offered as price today, may not have been possible as average price setting just a couple of years ago; just saying that your 'either-either' remark about their revenues strategy is a little bit naive, to say the least.

I doubt anybody around here has enough insight and access to current financial figures to make any meaningful comments (and otherwise he/she certainly will not share them), but given they remain convinced they will do at least as good as last year while having a pretty good look at year's end already, any likely drop in revenues per ticket must be more than compensated by the increase in passengers plus associated cost cutting combined, something which is indeed possible if you consider their growth.

The exact financial end result is a cocktail of those 3 elements, but what we can say for a fact based on publicly available data is that they do not seem to have even the slightest problem attracting (new) customers despite all the competition and since we are already October we can safely say that the market in Belgium isn't exactly reacting like repeatedly predicted at the start of this year, to say the least.

Other than that, as an aviation enthousiast I am very pleased to see significant growth has come to the aviation sector in Belgium as it is an important sector to our economy, both in (in)direct employment as well as in opening up our country (and it's businesses) to the rest of the world and so I hope it will continue for some time still. As somebody who's used to deal with finances, I can tell you that with such explosive customer growth combined with a clearly positive trend to their operating result, the boardroom will be failry pleased with the way in which the company performs and shareholders will not be worried about their investment too much: with this kind of results, they are more than just safe, regardless whether it is plus or minus a couple of millions.

[convair]

Despite the encouraging figures, SN seem to remain coolheaded: the arrival of their next A319 hasn't been officially confirmed yet.

[Flanker2]

I don't know about your eduction flanker, but your analysis is missing quite a few important elements, not surprisingly leading you to an explanation which mainly confirms your old beliefs you keep repeating over and over again, rather than lead to updated insights and foward looking guidance.

I think we all know a financial result is the difference between revenues on one side and costs on the other, yet when you take a hit at their revenue management, you are talking as if only the revenues side of their business has changed, something which isn't very likely I would think.

I read here they've lowered their costs by more than 10% vs last year, which is of course an absolute must if you want to offer lower fares (and attract more passengers from it). As such, what is offered as price today, may not have been possible as average price setting just a couple of years ago; just saying that your 'either-either' remark about their revenues strategy is a little bit naive, to say the least.

I won't go into detailed analysis as it's a waste of time, but a 10%/100 million cost reduction is not possible for SN. You're confusing CASM with total cost (including operating and overhead), as is Tolipanebas and many people within SN.
Like I said many times, CASM is important but lowering CASM through higher capacity aircraft is only achievable if there is a high demand of pax at good/profitable yields. Lowering your CASM has no meaning if it lowers your yields even more.

@Convair, I believe the growth figures.
It's only that except for EK, all the additional demand was created through lower fares and not through additional, sudden demand at the same fares. It's not like millions of Belgians suddenly remembered that air travel exists.

[Passenger]

I won't go into detailed analysis as it's a waste of time, but a 10%/100 million cost reduction is not possible for SN. You're confusing CASM with total cost (including operating and overhead), as is Tolipanebas and many people within SN. Like I said many times, CASM is important but lowering CASM through higher capacity aircraft is only achievable if there is a high demand of pax at good/profitable yields. Lowering your CASM has no meaning if it lowers your yields even more.

The figures contradict your statement:
Passengers : +19,5%
Available Seat Kms : +5,8%
Revenue Pax-Kms : +14,2%
Freight Ton-Kms : +8,5%
Overal Load Factor : +4,9%
Passenger Load Factor : +5,7%

It's only that except for EK, all the additional demand was created through lower fares and not through additional, sudden demand at the same fares. It's not like millions of Belgians suddenly remembered that air travel exists.

The figures contradict your statement:
Passengers : +19,5%
Available Seat Kms : +5,8%
Revenue Pax-Kms : +14,2%
Freight Ton-Kms : +8,5%
Overal Load Factor : +4,9%
Passenger Load Factor : +5,7%

Those "millions of Belgians" indeed knew that air travel existed. But for different reasons, they didn't use Brussels Airlines till recently: because they thought that "low cost carriers" were allways cheaper, because they estimated the previous SN-fares too expensive for a city trip or a short holiday.

The arrival of Ryanair at Brussels has changed things. Brussels Airlines lowered it's fare in two waves: a first time just after Ryanair announced they came to Brussels, and a second time with their 69 Euro deal. With that latest move, Brussels Airlines take over much more Ryanair clients then Ryanair does from them. Apart from taking over Ryanair clients, this 69 Euro deal creates a new clientele for Brussels Airlines: tourists who don't want to use "low cost carriers" out of principle, but at the sime time had no budget for legacy carriers like Brussels Airlines (even not in b.light, let alone b.flex). Those people now estimate that a city trip with flights at 69 Euro pp is good value for money. So instead of a CenterParcs or another weekend in Paris, they go to Eastern or Southern Europe for a weekend breakaway.

Only winners then? Not exactly. Charleroi-Airport looses twice: they loose former FR-CRL passengers, now flying FR-BRU. And they loose former FR-CRL passengers, now flying SN-BRU.