PANDEMIC COSTS BELGIUM’S NATIONAL AIRLINE DEARLY
(Posted 06th August 2020)
As a result of the coronavirus pandemic and its unprecedented impact on the aviation sector, Brussels Airlines reports a loss of EUR -182 million in the first six months of 2020, despite the drastic cost-control measures taken to combat the crisis. First half revenues fell to EUR 252 million, 63% below their prior-year level. (H1 2019: EUR 684 million). Brussels Airlines transported 67% fewer passengers between January and June and the seat load factor dropped by 7.4 percentage points to 72.4%.
The coronavirus, which brought aviation worldwide to a standstill within a few weeks’ time, had a dramatic impact on the financial results of Brussels Airlines in the first half year of 2020.
Brussels Airlines temporarily suspended all scheduled flights from 21 March to 14 June 2020. Minimal flight capacities were maintained for repatriating Belgian and German citizens, to transport medical equipment to Africa and to bring medical masks from China. On 15 June, the airline finally relaunched its commercial flights again, with a limited network.
As a result, the airline reports an adjusted EBIT of EUR -182 million for the first six months of the year (H1 2019: EUR -36 million). The EBIT decreased to EUR -211 million (previous year: EUR -36 million). The difference compared with the adjusted EBIT is due to write-downs of EUR 29 million on right-of-use assets consisting of two Airbus A330-200s and eight Airbus A319s already in the first quarter.
Revenues were down by 63%, from EUR 684 million to EUR 252 million. Brussels Airlines transported 1,590,448 passengers between January and June, compared to 4,854,603 last year. 14,114 flights were operated, a 64% decline compared to the 39,267 flights in the first half of 2019. The seat load factor dropped 7.4 percentage points from 79.8% to 72.4%.
In response to the crisis, Brussels Airlines took immediate and drastic actions not only to reduce variable costs but also to reduce fixed costs (technical unemployment for staff; stopping all temporary contracts; supplier negotiations; stop of all projects and investments…). The total operating expenses decreased by 39% to EUR 463 million, primarily due to the volume-related decline and measures in the cost of materials and services.
The turnaround program Reboot Plus, which was already planned before the coronavirus crisis hit, is now being further intensified as a result of the coronavirus outbreak. With Reboot Plus, Brussels Airlines is structurally tackling its cost structure and optimizes its network by cutting marginally profitable and unprofitable routes, resulting in a fleet reduction of 30%. The overall size of the company, and as a consequence of its workforce, will become 25% smaller. At the same time, the airline focuses on structural profitability in order to enable solid growth. The carrier therefore needs to reduce its overall costs, increase efficiency and productivity. To reach its target of increased competitiveness and structural profitability, Brussels Airlines takes several measures; such as negotiations with lessors to reduce its fleet size; cost reductions through supplier negotiations; simplification and automation of processes; increase of efficiency at the level of operations and product alignment with the Lufthansa Group network airlines.
In line with its restructuring plan, and to overcome the current crisis, the company recently reached two major milestones. First, an agreement could be reached with its social partners concerning the turnaround of the company, which foresaw the reduction of 1000 jobs within the company. Thanks to alternative measures, to which the employees could subscribe, the number of forced dismissals is limited to 60. Secondly, the Belgian Government and Lufthansa agreed on a stabilization package to help Brussels Airlines overcome the unprecedented crisis and to become structurally profitable.
Since resuming flight operations on 15th of June, the airline has slowly and gradually been increasing its flight operations again for both holidaymakers and business travellers, in line with market demand and taking into account the constantly changing travel restrictions.
Due to the still volatile and highly unpredictable situation worldwide, it is not possible to make forecasts for 2020 as a whole.
Brussels Airlines had intended to resume flights to Eastern Africa, namely Entebbe and Kigali as early as 14th of July, but the continued airport closure – increasingly seen as an irrational non-scientific decision – has thwarted their plans.
It is at this stage not known when Entebbe will open up again for scheduled passenger traffic while in stark contrast are all other regional airports open for traffic again, including Kigali, Nairobi, Bujumbura, Juba, Nairobi, Mombasa, Kilimanjaro, Dar es Salaam and Zanzibar.
The airport in Addis Ababa continued to operate uninterrupted.