In the first six months of 2009 Adria Airways carried a total of 503,438 passengers, a decline of 16% on the same period of 2008. The biggest drop in airline traffic was recorded in German-speaking business destinations and Brussels, which is chiefly a consequence of Slovenia’s Presidency of the EU, with an overall decline at these destinations of almost 20%, while on certain Balkan services we have even observed higher growth of passengers than in 2008, especially on the Skopje, Priština and Sarajevo services.
One problematic element in the number of passengers carried relative to the same period last year is in fact the structure of passengers, which has changed entirely, with an increase in the number of passengers in economy class, while the decline in the number of passengers carried in business class has been practically over 50%, in consequence of which the average price of a ticket sold has dropped by 6% compared with the same period of 2008. In the first six months of 2009 a total of 911 tons of cargo were carried, and this is also 20% less than in 2008.
The financial performance has followed the drop in physical turnover, with the first preliminary operating results for January to May showing a full 19% decline in generated revenue compared to the same period last year. In line with this the company management has set about reducing flight operating costs, and has succeeded in bringing them down 13%. Cost reduction has been pursued in specific groups, so supplier costs were reduced on average by 12%, administrative costs on average by 13% and wages, in line with the signed agreement, by 5%. Flight rationalisation and the merging of individual flights have also yielded 4% lower airport costs and aircraft provisioning costs.
The number of passengers carried this year is comparable to 2007, but currently Adria is operating with three more aircraft, with 24% greater seat capacity, 15% more pilots and 17% more flight attendants, which accounts for covering flight needs with the new aircraft, so there is practically no more scope for further cost reduction. In keeping with the greater capacity, depreciation is 63% or 7 million euros higher, aircraft insurance is up to 45% higher and the labour costs of new employees are 17% or 6 million euros higher.
As indicated by a comparative look at other airlines, the economic recession and financial crisis have hit the airline industry hard. All the European and global air carriers are dealing with similar difficulties, for instance Lufthansa for the first time in many years of positive results has posted a loss of 273 million euros, and this year it has grounded 25 aircraft, cut a certain number of flights and combined individual services; Air France is approaching a critical billion-euro loss and is drawing up a plan to lay off a large number of employees; a similar course is being taken by Austrian Airlines, which in the coming days is planning to lay off thousands of employees; Sky Europe has even declared insolvency and has reduced its number of operational aircraft by two thirds, leaving it just five aircraft for current operations; the first loss ever is also being posted by Ryan Air, as well as by other European carriers – the Hungarian airline Malev, Polish Lot, Czech ČSA and so on. At the same time the IATA, the International Air Transport Association, gave the assessment at its regular annual conference that this year’s decline in airline revenues should amount to 15%, pointing to the hardest year in the history of aviation, since for instance in the most critical period to date for the IATA, the period following 11 September 2001, airline traffic fell by 7%. Since then the IATA showed positive results for the first and last time in 2007. For this year the association is planning for a 9 billion dollar loss.
The Adria management sees no scope for anticipating any drastic improvement before the end of the year, so the management has already drafted a revision to the business plan for 2009. In the revised plan Adria Airways is preparing for 15% lower revenues than forecast at the beginning of the year and 15% lower operating costs, especially in the aforementioned areas. Adria estimates that the end-of-year EBIT will amount to 3.2 million euros in the negative. Yet despite the extremely harsh operating conditions, the airline does not anticipate insolvency, and equally, the revised plan envisages current coverage of all operating liabilities, a positive cash flow and a reduction of debt in line with the signed agreements. The management has already presented the revised plan to the company’s major owner, and anticipates that it could be addressed in its first regular meeting by the company’s newly appointed supervisory board.
(c) Centre for Asia Pacific Aviation. Date posted: 09-Jul-09
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Adria Airways drafts revised plan for 2009 
