raport 2010 luxair
TRANSCRIPT
Annual Report 2010LuxairGroup
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Board of Directors 6Chairman’s letter 8Executive Committee 10CEO’s letter 12Management report 14The Luxair fleet 25Corporate Social Responsibility 27Balance sheet 28Highlights 31Profit and loss account 32Operational results 33Auditor’s report 34
Annual Report 2010LuxairGroup
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6 7Board of Directors
two-three-one-sevenpersonnel
Marco GadolaMember since 1 February 2010, Panalpina WorldTransport (Holding) AG
Jean GraffMember, Ministry of Foreign Affairs
Jan Henning zur HausenMember until 24 September 2010, Deutsche Lufthansa AG
Karsten BenzMember since 24 September 2010, Deutsche Lufthansa AG
Jean-Claude FinckVice-Chairman of the Board, Banque et Caisse d’Epargne de l’Etat
Michel BirelMember, Banque et Caisse d’Epargne de l’Etat
Robert FreiMember until 1 February 2010, Panalpina WorldTransport (Holding) AG
Marc HoffmannChairman of the Board
Max NillesMember, Ministry of Sustainable Development and Infrastructures, Department of Transport
Frank N. WagenerMember, Dexia Banque Internationale à Luxembourg
Paul ReuterMember, LuxairGroup Personnel Representative
Helder De Oliveira BorgesMember, LuxairGroup Personnel Representative
Raoul RoosMember, LuxairGroup Personnel Representative
Frank ReimenMinistry of Sustainable Development and Infrastructures, Government Commissioner for Luxair S.A. until 1 January 2011
Tom WeisgerberMinistry of Sustainable Development and Infrastructures, Government Commissioner for Luxair S.A. since 2 February 2011
Michel FolmerGeneral Secretary L uxairGroup, Secretary of the Board of Directors of Luxair S.A.
8 9Chairman’s letter
autumn of 2008 produced a severe drop in high-yield passengers and this weakness shows no sign of abating.
While our tour operator LuxairTours produced excel-lent results in 2010 and medium-term prospects remain very positive, 2011 will challenge our strategy in this area as well. The bottom line will be hit severely by recent events in North Africa and we can only hope that our customers’ loss of confidence in des-tinations such as Tunisia, Morocco and Egypt will be only temporary.
Turning to cargo handling, here too we have to put the strong performance of 2010 in perspective: although tonnage handled by LuxairCARGO is increasing con-stantly, we are still far from the 900,000 tons handled in 2007 and the market remains fragile.
Faced with all these challenges, our goal remains to attract and convince customers with the quality that we have to offer – be it Airline, Tour operating,
Cargo handling or LuxairServices. This is why, despite the crisis, we are preparing for the future and have not hesitated to make important investments such as ordering two new Boeing 373-800 aircraft and testing new winter destinations like Cape Verde, which has proved to be a success. We have also taken advantage of the business downturn to review and optimize our processes at LuxairCARGO.
I believe that we must maintain this positive approach and continue our strategy of investing for the future in order to meet the expectations of our clients. Yet in so doing, we may have to rethink the way we currently do business as competition becomes even fiercer, external factors continue to affect us and some of our core routes start showing weaknesses. I believe that LuxairGroup will live up to the challenge.
The year 2010 reminded us again how deeply uncon-trollable external events can affect airline companies. At the start of the year we experienced unusu-ally severe winter conditions with heavy snow and Arctic temperatures. This was followed by the totally unexpected volcano ash crisis in April that literally shut down the skies over Europe for several days, leading to the cancellation of around 100,000 flights. Later in the summer we endured air traffic control strikes in France, Greece and Spain. And finally the year closed with prolonged freezing and snowy conditions from the end of November.
With our customer-focused strategy, LuxairGroup met all these challenges in a highly professional manner. We can be particularly proud of the way we cared for and repatriated our stranded customers during the ash-cloud crisis.
Commercially speaking, although the market has improved a little, we are certainly not yet out of trouble. The economic crisis that started in the
Chairman’s letter
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10 11Executive committee
Thomas CzypulowskiSenior Vice-PresidentIS&O and Change management
Michel FolmerGeneral Secretary
Robert FaymonvilleVice-President Human Resources
Laurent JossartExecutive Vice-PresidentFinance
Martin IslerExecutive Vice-PresidentAirline
Alberto KunkelExecutive Vice-President Tour Operating and Sales&Marketing
Adrien NeyPresident and ChiefExecutive Officer
Hjoerdis StahlExecutive Vice-PresidentCargo Handling,Ground Equipment and Buildings
12 13CEO’s letter
CEO’s letter
Generating higher numbers of passengers is not suf-ficient if our unit revenue continues to decrease. This decline in yield is caused principally by our corpo-rate customers’ change in travel policy, which was provoked by the global economic crisis in 2009, towards less frequent business travel, fewer last-minute reservations and economy class tickets for short-haul journeys.
Pressure exerted by our competitors on both point-to-point traffic and connections has compounded this decline in yield. At the end of October 2010 Lufthansa launched its own operations on the Munich route with two flights a day and British Airways introduced flights to London Heathrow from the end of March 2011. The negative impact of these moves on our revenue, in addition to rising oil prices and the constant increase of operating costs will exert down-ward pressure on our operating results in 2011.
We must recognize that profitability of the short- and medium-haul network of all European national airline companies has been under extreme pressure for sev-eral years. The 2009 economic crisis had a massive catalyst effect and accelerated the process. For large carriers such as Air France, Lufthansa and British Air-ways, 2010 profits came essentially from long-haul operations. Traditional smaller European airlines without long-haul routes are in financial agony; only specialist low-cost, no frills operators are managing to stay in the black.
In view of the large potential loss we face, Luxair Luxembourg Airlines will have to prepare a new strategy to guarantee that we prosper in the future. This is the absolute priority of our management team in 2011.
After 2009 closed as one of the worst years in air travel history, 2010 showed an improved picture with a return to growth. Despite the ash-cloud crisis, LuxairTours managed to sell 6% more packages than in 2009. Most of its markets grew; even the hard-hit French market experienced growth, although this proved to be weak.
After registering a loss in 2009 for the first time in its history, LuxairCARGO increased volume in 2010 and managed to return to profitability, even though volume did not even reach 2004 levels. LuxairServices ground handling and catering took advantage of the increasing number of passengers at Findel airport, as did buy bye Luxembourg shops. Luxair Luxembourg Airlines also managed to increase its passenger numbers, yet the loss in high-yield customers con-tinued. It is clear that the biggest challenge facing Luxair profitability is the continuous decline in yield.
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14 15Management report
As 2009, the year 2010 was marked by a strong increase in oil prices. Starting in January at USD 80 per barrel, the price dropped in the second quarter but ended 2010 at almost USD 100 per barrel. For many years Luxair has adopted a policy of hedging kerosene prices and the euro/dollar exchange rate, enabling us to smooth out abrupt changes and par-tially compensate for price increases.
In addition to repeated stoppage actions by air traffic controllers in several parts of Europe in 2010, two exceptional events seriously perturbed air traffic and affected the financial performance of the whole sector.
Following the eruption of the Icelandic volcano Eyja-fjallajökull, clouds of dust paralyzed air traffic for sev-eral days in April. As soon as European airspace was closed, Luxair Luxembourg Airlines set up an impres-sive range of logistics to guarantee a rapid and smooth repatriation of our customers. The cost of lodging
and repatriation was paid for by Luxair and a re-booking and reimbursement policy was set up from the first day. In total 149 return flights were cancelled affecting almost 14,000 passengers. The bottom line of Luxair Luxembourg Airlines was severely affected, to the tune of around EUR 2 million.
Heavy snowfall and unusually harsh weather condi-tions led to the closure of Luxembourg airport, and many other European airports, and severely dis-rupted our flight programme throughout the entire last two weeks of December. Almost 200 flights were cancelled and 8,000 customers directly or indirectly affected by the winter conditions. Loss of revenue and assistance costs to passengers totaled around EUR 1 million.
Outlook for 2011
IATA forecasts positive operating results for Euro-pean air transport companies in 2011 (USD 0.5 billion),
Luxair Luxembourg Airlines took advantage of the economic recovery in 2010 and recorded growth in the number of passengers (+6.4%) although it was unable to curb the continuing erosion of yield (-4%).
Luxair Luxembourg Airlines has continued its strategy of stimulating demand for private travel and/or lei-sure with recurring offers of low-priced tickets cou-pled with aggressive marketing campaigns (notably 185,000 Primo tickets and other promotional tariffs sold in 2010, compared with 148,000 in 2009).
Concerning business travel on short- and medium-haul flights, the reduction in yield observed in recent years and accelerated by the economic crisis since the end of 2008, continued. In order to constrain costs, many customers have both lowered considerably the number of flights by personnel and/or modified their travel policy by banning last-minute reservations and business class travel in favour of economy class for short distances.
Overall ticket split 2010
Luxair Luxembourg Airlines
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Economy Class Tickets (78%) Business Class Tickets (22%)
16 17Management report
of business travellers for first and business classes. Many traditional European airline companies, now independent and smaller, which do not benefit from a long-haul network are in financial agony and fighting for their lives. The only airline companies which operate intra-European networks and are prospering are the low-cost operators.
In view of the large potential loss, Luxair Luxembourg Airlines will have to prepare a new strategy.
below the level of 2010 which recorded profits of USD 1.4 billion. The fragility of the economic recovery and explosion of oil prices are at the root of this decrease.
The first few months of 2011 suggest a scenario of soft recovery but the economic environment remains difficult and erratic.
Even if Luxair will generate an increase in the number of passengers, its positive effects will be destroyed by the continued decline in yield. This decline is pro-voked principally by a move away from business class to economy class due to the application of strict travel policies by our customers (fewer last-minute reserva-tions, negotiation of better prices, etc.) and by the pressure exerted by our competitors on both point-to-point traffic and connections.
At the end of October 2010 Lufthansa launched its own operations on the Munich route with two flights a day and British Airways introduced flights to London Heathrow at the end of March 2011. The neg-ative impact of the above moves on our revenue, in addition to rapidly rising oil prices and the constant increase of operating costs will exert downward pres-sure on our operating results in 2011.
It is important to note that the profitability of the short- and medium-haul network of all European national airline companies has been under extreme pressure for several years. The 2009 economic crisis had a massive catalyst effect and accelerated the process. The 2010 profits of large carriers such as Air France, Lufthansa and British Airways came essentially from their long-haul operations and the improved appetite
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18 19Management report
part of the total offer. The Cape Verde destination and launch of the LUXiClubs concept were highly successful.
The Belgian and German markets were the most dynamic and the Luxembourg market, although mature, posted a promising increase. On the other hand, the French market and particularly the Lor-raine region, which was severely affected by the crisis in 2009, had difficulty recovering and showed only a weak growth. The geographical customer split was as follows: France 42%, Luxembourg 37%, Belgium 10% and Germany 7%.
In April, 37 return flights were cancelled due to the eruption of the Icelandic volcano, affecting 9,100 pas-sengers. The impact on the LuxairTours result was around EUR 1.5 million.
Outlook 2011
Events in North Africa and the Middle East have reshuf-fled the cards (-23% customers in February 2011 versus February 2010) and the year 2011 is full of uncertainties.
The timing of any resumption in tourism to North Africa is unpredictable and dependent on the recom-mendations of the Ministry of Foreign Affairs and espe-cially, the degree of enthusiasm amongst the travelling public to visit the countries affected. The financial con-sequences for LuxairTours will be significant.
Moreover, competition will become even tougher with the arrival in Luxembourg of Air Berlin. This increases the pressure already applied by Ryanair operating out of Hahn airport and the ambitious growth plans of Metz-Nancy and Saarbrücken airports.
LuxairTours recorded a good year 2010, in spite of collateral damage from the Icelandic volcano.
In order to replace the 17-year old Boeing 737-500 which no longer offered a competitive capacity (121 seats) and in order to respond to rising demand, LuxairTours took out a 3-year lease of a 186-seat Boeing 737-800 in the summer. Thanks to a very competitive cost per seat and its capacity to reduce the number of flights previously operated with the B737-500, this aircraft has generated significant savings.
Sales of package travel increased by 6%. Our flag-ship product, the LuxairTours brochure, registered strong growth of almost 10% (following a decline of 12% in 2009), demonstrating the strength of cus-tomer demand. Special offers and “last minute” prod-ucts declined by 1% and still represent only a limited
LuxairTours
Geographical customer split
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France (42%) Luxembourg (37%) Belgium (10%) Germany (7%)
20 21Management report
May compared to only +5.5% in November). Growth was also shared unequally between the regions of the world: almost 25% in Latin America, the Middle East and Asia compared to only 10.8% in Europe.
LuxairCARGO took advantage of this rebound and achieved a successful year with growth of almost 9% in volume handled. However 2010 volume did not reach the level of 2004, showing that six years of growth were lost in the recession.
Volume handled at the Cargocenter reached 735,000 tons versus only 672,000 in 2009. In fact, with the recovery of cargo traffic and better aircraft fill rates, the growth of point-to-point freight was much stronger than that of transit cargo. The number of air-craft movements remained stable at 5,170.
LuxairCARGO maintained the position of Luxembourg airport as the fifth airfreight platform in Europe.
In 2009 and for the first time since the launch of our freight activities, we had closed the year with an operating loss. Thanks to the increase in volume, we regained profitability in 2010.
Outlook 2011
LuxairCARGO welcomed two new clients at the end of 2010: Silk Way Airlines and Unitop. Both companies will contribute to the growth in volume handled by our Cargocenter in 2011.
Yet the market remains fragile and fluctuation has to be expected.
LuxairCARGO
Nature of goods
Computers (33%) Courrier and express mail (3%) Garments (15%) Spare parts (12%) Perishables (17%) Others (20%)
According to the World Trade Organisation, the crisis led to a decrease of 12% in international trade in 2009, the steepest annual decline since the Second World War. After years of strong and uninterrupted growth, at a higher level even than passenger traffic, air freight was hit extremely hard by the world-wide economic recession. The industry was severely affected by the years 2008 and 2009 which pro-duced a sharp contraction of volume (-4% in 2008 and -14.5% in 2009 according to IATA). In addition to crumbling volumes, our customers – the airline air freight companies – also suffered a decrease in their unit revenues.
2010 put an end to spiraling decline, with air freight growth of 20.6% worldwide. However the year was also marked by large seasonal variations (+35.2% in
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22 23Management report
LuxairServices
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LuxairServices, comprising catering, ground handling and passenger assistance, is a vital part of the travel chain and we constantly monitor its quality to ensure that we offer the highest standards of service to our customers. Major efforts have been made recently to improve efficiency through boosting e-services, notably e-ticketing and e-check-in.
Reflecting the economic upturn, usage levels of Findel airport reached 1,630,165 passengers, an increase of 5.1%, while the number of commercial aircraft movements decreased slightly to 34,883 over the year.
The Catering unit, which provides catering services to Luxair Luxembourg Airlines, LuxairTours and other airlines using Luxembourg airport, took advantage
of the higher number of passengers and served 1,486,000 meals in 2010, an increase of 7% com-pared to 2009.
Catering improvements also continue on the qualita-tive side through the increased use of regional prod-ucts for in-flight meals and regular changes in the catering concept for the benefit of our frequent flyers.
buy bye Luxembourg Shops
Since May 2008, LuxairGroup manages four buy bye shops in the new airport terminal at Luxembourg airport.
One of them is located landside in the main airport hall. Open 7 days a week to general public, it offers
a selection of perfumes, fashion, accessories and brand spirits.
Three more shops are located in the airside area. Also open 7 days a week, each of these stores is specialized in a given type of goods. i.e. accessories, fashion and perfumes, spirits and whines, as well as Luxembourg’s local specialties.
Check-in
Manual check-in (90,7%) E- & mobile check-in (9,3%)
24 Executive committee 25The Luxair fleet
lima-golf-indialima-golf-yankeelima-golf-deltalima-golf-romeolima-golf-charlielima-golf-quebeclima-golf-zulu lima-golf-tangolima-golf-echolima-golf-whisky
Bombardier Q400
2009 4
2010 4
Boeing 737-700
2009 3
2010 3
Embraer ERJ 145
2009 6
2010 6
Boeing 737-800
2009 -
2010 1
Embraer ERJ 135
2009 2
2010 2
26 27
Corporate Social Responsibility
In 2010 LuxairGroup consolidated its social com - mitment.
LuxairTours signed a partnership agreement with natur&ëmwelt. Thanks to this partnership, Luxair-Tours customers now have the opportunity to make a donation towards the protection of the environ-ment at the time they book their travel. At the end of the year LuxairTours doubles the sum collected in this way before donating it to natur&ëmwelt.
At the beginning of 2011, five new LuxairGroup depart-ments were awarded the quality label SuperDrecks-Këscht® fir Betriber, the organization that recognizes measures relative to responsible waste management.
LuxairGroup is committed to helping disadvantaged groups of people and supports social food services, a joint project with the Red Cross and Caritas.
The Ulysse Foyer receives support in the form of food donations from LuxairServices Catering.
With the aim of developing responsible tourism, LuxairGroup maintains a partnership with the asso-ciation ECPAT Luxembourg which fights against the sexual exploitation of children. This partnership not only involves financial support, it also produces regular awareness campaigns both at Luxembourg airport and on board LuxairTours holiday flights.
Lastly, in addition to these voluntary activities, LuxairGroup’s social responsibility is also manifested internally. LuxairGroup maintains close dialogue with its staff and, for example, provides a wide range of training and facilities linked to internal mobility.
The total number of passengers transported by LuxairGroup in 2010 amounted to 1,247,554, an increase of 6% versus 2009. LuxairGroup operated 25,898 flights compared with 26,484 the previous year.
The load factor increased with an average across the year of 73.8% compared to 72.9% in 2009.
The Luxair Luxembourg Airlines fleet was enlarged by one aircraft in 2010 with the delivery of a Bombardier Q400 in December 2009. At 31 December 2010, the fleet consisted of 8 Embraer (two ERJ 135 and six ERJ 145), 4 Boeing (three 737-700 and one 737-800) and 4 Bombardier Q400. A fifth Q400 aircraft was received in February 2011.
The Boeing 737-500 was sold during 2010 and two Embraer ERJ 135 aircraft were put up for auction.
In order to support the growth of LuxairTours, offer additional comfort to customers and operate aircraft with even lower environmental impact, two Boeing 737-800 aircraft were ordered. Deliveries are forecast for December 2012 and January 2015.
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The Luxair fleet
The Luxair fleet Corporate Social Responsibility
28 29Balance sheet at 31 December 2010
Assets 2010 2009
Fixed assets
Intangible fixed assets
Concessions and licences acquired for valuable consideration
6,198 6,198
Tangible fixed assets
Aircraft 64,003,821 72,024,937
Land and buildings 36,757,137 40,502,428
Plant, machinery and equipment 8,984,065 10,022,767
Fixtures, fittings, tools and furniture 3,861,961 5,055,433
Payments on account and assets under construction 10,196,355 5,287,120
Financial investments
Investments in affiliated undertakings 17,758,922 17,758,922
Loans to affiliated undertakings 24,490,965 36,345,865
Participating interests 62,166,907 62,166,907
Investments held as fixed assets 139,809 139,814
Other long term receivables 195,955 200,777
Own shares 4,635,609 4,635,609
Total fixed assets 233,197,704 254,146,777
Current assets
Stocks
Consumables 400,094 318,509
Goods for resale 1,416,694 1,259,866
Debtors
Trade debtors 13,779,784 12,895,575
Amounts owed by affiliated undertakings 24,689 192,601
Amounts owed by participating interests 9,209,746 8,474,161
Other debtors 8,183,390 8,970,516
- maturing in more than one year - -
Transferable securities 139,678,922 147,663,762
Cash and cash equivalents 63,208,637 24,305,492
Total current assets 235,901,956 204,080,482
Deferred charges and accrued income 8,824,530 2,871,183
Total assets 477,924,190 461,098,442
Liabilities 2010 2009
Shareholder’s Equity
Subscribed share capital 13,750,000 13,750,000
Reserves
Legal reserve 1,375,000 1,375,000
Reserve for own shares 4,635,609 4,635,609
Other reserves 234,640,982 229,640,982
Deferred capital gain 3,341,646 3,341,646
Retained earnings brought forward 3,110,731 6,788,162
Profit for the financial year 8,927,455 1,322,569
Total shareholder’s equity 269,781,423 260,853,968
Provisions for liabilities and charges
Provisions for aircraft overhaul 35,339,704 33,874,106
Provisions for pension and similar obligations 23,328,873 22,428,896
Provisions for taxation 1,750,000 1,900,000
Other provisions 10,381,063 11,010,970
Total provisions for liabilities and charges 70,799,640 69,213,972
Creditors
Bank loans and overdrafts 44,375,000 55,062,500
- including: maturing in more than one year 33,687,500 44,375,000
Trade creditors 45,811,457 38,895,889
Amounts owed to affiliated undertakings 5,678,403 445,226
Tax creditors 3,458,475 3,533,649
Social security creditors 4,485,460 4,288,505
Other creditors 5,202,160 4,174,960
Total creditors 109,010,955 106,400,729
Deferred income and accrued charges 28,332,172 24,629,773
Total liabilities 477,924,190 461,098,442
Expressed in eurosThe complete set of full year 2010 results is available at www.luxairgroup.lu
Expressed in eurosThe complete set of full year 2010 results is available at www.luxairgroup.lu
30 31
Passengers in Luxembourg
2009 1,551,344
2010 1,630,165
Seat Load Factor
2009 72.9 %
2010 73.8 %
Data for the year ended 31 December 2010* The total includes charter flights operated by LuxairGroup** According to the “Loi du 19 décembre 2002 concernant la comptabilité et les comptes annuels des entreprises“The complete set of full year 2010 results is available at www.luxairgroup.lu
Operational data 2008 2009 2010
Passengers (total, including charter flights operated by LuxairGroup)* 1,219,184 1,179,796 1,247,554
Revenue Passengers-km (RPK) (mio) * (total) 1,371 1,380 1,470
Seat Load Factor 73.4% 72.9% 73.8%
Number of meals served (catering) 1,513,203 1,391,688 1,486,000
Number of passengers assisted at Luxembourg airport 1,695,772 1,551,344 1,630,165
Number of flight hours (for entire LG‘s fleet) 36,524 35,837 35,768
Freight handled (tons) 810,118 672,114 735,329
Personnel (on average) 2,461 2,334 2,317
Operational fleet (on 31 December)
Boeing 737-800 - - 1
Boeing 737-500 1 1 -
Boeing 737-700 3 3 3
Embraer ERJ 145 6 6 6
Embraer ERJ 135 2 2 2
Bombardier Q400 3 4 4
Financial data
Turnover (mio EUR) 416.7 382.8 408.8
Operating profit (mio EUR) 1.5 (7.1) 1.8
Net Result (mio EUR) 8.5 1.3 8.9
Net Profit Ratio 2% 0.3% 2.2%
Balance Sheet Total (mio EUR) 493.0 461.1 477.9
Capital & Reserves (mio EUR)** 259.5 260.9 269.8
Capital & Reserves / Balance Sheet Total 53.2% 56.6% 56.5%
Return on Equity 3.3% 0.5% 3.3%
Highlights
Operating profit (mio EUR)
2009 (7.1)
2010 1.8
Freight handled (tons)
2009 672,114
2010 735,329
32 33Profit and loss account Operational results
1,247,554 passengers were carried by Luxair Luxem-bourg Airlines in 2010. 25.898 flights were operated with an average load factor of 73.8%.
Luxair Luxembourg Airlines achieved an increase of passengers of 6.4% versus 2009 and reached 760,495 passengers. The seat load factor increased from 58.7% to 60.4%.
The percentage of passengers traveling in business class and economy class with high-yield flexible tickets continued to weaken from 24% to 22% (versus 37% in 2007 and 30% in 2008) of the total number of passengers.
Growth was back on all LuxairTours’ markets. Even the French market, which was severely affected by the crisis in 2009, took up again. The trend was strengthened by the success of the Cape Verde des-tination and the LUXiClub, a holiday club for children.
In 2010, LuxairTours operated 4,345 flights and han-dled 486,791 passengers. LuxairTours flights recorded a load factor of 81.1% compared to 80.6% in 2009.
The geographical customer split was as follows: France 42%, Luxembourg 37%, Belgium 10% and Germany 7%.
LuxairCARGO handled 735,000 tons versus 672,000 tons in 2009. However 2010 volume did not reach the level of 2004, showing that six years of growth were lost in the recession. The number of aircraft movements remained stable at 5,170.
Passenger numbers at Findel airport grew to 1,630,165, an increase of 5.1%. Our activities in ground handling, passenger assistance and catering, as well as the buy bye Luxembourg shops took advantage of the rising activity.
Net turnover passed from EUR 382,778,520 in 2009 to EUR 408,825,327 in 2010 and operating earnings increased from a loss of EUR 7,065,732 in 2009 to a profit of EUR 1,807,617 in 2010.
After taking into account the financial results and extraordinary income, the result before tax shows a profit of EUR 8,927,455. The total available profit, taking into account the carried-over profit of EUR 3,110,731 is EUR 12,038,186.
For the year ended 31 December 2010Expressed in eurosThe complete set of full year 2010 results is available at www.luxairgroup.lu
Charges 2010 2009
Consumption of goods for resale, raw materials and consumables
7,944,620 7,348,839
Other external charges 271,918,493 259,838,665
Personnel expenses 131,216,505 130,369,193
Depreciation charges of tangible and intangible assets 21,067,093 21,079,000
Other operating charges 1,001,041 1,112,731
Value adjustments in respect of financial assets and transferable securities held as current assets
347,354
Interest and similar charges
Concerning affiliated enterprises 3,109 16,562
Other interest and charges 2,235,913 2,707,884
Extraordinary charges 78,088 1,484,984
Taxes on profits 150,000 -
Profit for the financial year 8,927,455 1,322,569
Total charges 444,889,671 425,280,427
Income 2010 2009
Net turnover 408,825,327 382,778,520
Other operating income 26,130,042 29,904,176
Income from participating interest
Derived from affiliated enterprises - 650,000
Other income from participating interests 234,244 1,451,220
Other interest and similar income
Derived from affiliated enterprises 1,070,534 911,323
Other interest and similar income 1,963,560 2,317,210
Extraordinary income 6,665,964 7,267,978
Total income 444,889,671 425,280,427
34 35Auditor’s report
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To the Shareholders of Luxair, Société Luxembour-geoise de Navigation Aérienne S.A.
Report on the annual accounts
We have audited the accompanying annual accounts of LUXAIR, Société Luxembourgeoise de Navigation Aérienne S.A., which comprise the balance sheet as at 31 December 2010 and the profit and loss account for the year then ended as well as the appendices with a summary of significant accounting policies and other explanatory notes.
Board of Directors’ responsibility for the annual accounts
The Board of Directors is responsible for the prepara-tion and fair presentation of these annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the annual accounts. This responsibility also includes an internal audit that it deems necessary to prepare the annual
accounts not containing any material misstatement, whether arising from fraud or resulting from error.
Auditor’s responsibility
Our responsibility is to express an opinion on these annual accounts based on our audit. We conducted our audit in accordance with International Stand-ards on Auditing as adopted by the Financial Sector Supervisory Commission. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assur-ance whether the annual accounts are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts. The procedures selected depend on the Auditor’s judgment, including the assessment of the risks of material misstatement of the annual accounts, whether arising from fraud or resulting from error. In making those risk assess-
ments, the Auditor considers internal control rele-vant to the entity’s preparation and fair presentation of the annual accounts in order to design audit proce-dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Direc-tors, as well as evaluating the overall presentation of the annual accounts.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, these annual accounts give a true and fair view of the financial position of LUXAIR, Société Luxembourgeoise de Navigation Aérienne S.A. as of
31 December 2010, and of the results of its operations for the year then ended in bourg legal and regula-tory requirements relating to the preparation of the annual accounts.
Report on other legal and regulatory requirements
The management report, which is the responsibility of the Board of Directors, is in accordance with the annual accounts.
Luxembourg, 22 April 2011
PricewaterhouseCoopers S.à r.l. Represented by Luc HenzigRéviseur
on the stand and leaving frequency
38 Executive committee
LuxairGroupNotes accompanying the annual accounts 1
3.2.2 Tangible assets
Tangible assets are valued at their purchase cost, which includes related charges, or at their production cost. Tangible assets are depreciated based on their estimated useful lifetime. Goods for which the purchase value falls below EUR 870 are directly depreciated and recorded in the profit and loss account.
The depreciation rates linearly applied are established as follows:
Depreciation rates
Aircraft 6.66% to 10.00%
Constructions 4.00% to 20.00%
Plant installations and machinery 10.00% to 20.00%
Other installations, tools and furniture 10.00% to 33.33%
The items concerning the Q400 airplanes are depreciated according to the amortisation duration remaining on the final airplane grounded in this fleet.
If the Company feels that a tangible asset has decreased in value permanently, an additional value reduction is made in order to reflect this loss. These value adjustments remain active until the reason for their implementa-tion ceases to exist.
3.2.3. Financial assets
Shares in associated companies, interests and securities which are classified among fixed assets are individu-ally valued at the lower amount of their purchase price or their estimated value according to the Board of Directors, with no compensation between the individual capital gains and losses.
Receivables recorded among financial assets are valued at their face value. A value adjustment is made when the estimated achievable value is lower than the face value.
3.2.4. Stocks of raw materials and consumables
Stocks of raw materials and consumables are valued at the lower of their purchase price, determined on the basis of the average weighted prices, and their realisable value. Stocks of consumables include fuel, lubricants, food and miscellaneous supplies. A value adjustment is made when the estimated achievable value is lower than the book value. These value adjustments remain active until the reasons for their implementation cease to exist.
3.2.5. Current receivables
Receivables are recorded at their face value. Their value is adjusted when their recovery appears doubtful. These value adjustments remain active until the reasons for their implementation cease to exist.
Note 1 – General Remarks
The company “Société Luxembourgeoise de Navigation Aérienne S.A.” (“LUXAIR”), hereinafter referred to as the “Company” is a limited company governed by Luxembourg law, established on 9 January 1948 for an unlimited term. The registered offices are located in Sandweiler and the company’s financial year runs from 1st January to 31st December of each year.
The Company’s main aim is to provide an air transport service for both passengers and freight, as well as to supply other services both directly and indirectly related to its main activity.
In accordance with current legislation, the consolidated accounts will be published.
Note 2 – Presentation of annual accounts
The 2010 annual accounts, presented along with those of 2009 for comparison purposes, have been drawn up in accordance with current legislative provisions.
In order to ensure greater comparability between the annual account for 2010 and 2009, certain amounts in other external charges and other operating income were reclassified in the accounts on 31.12.2009.
In accordance with Article 4 of the law of 10 December 2010, the Board of Directors has decided for the finan-cial year ending 31 December 2010 to not apply the changes made by this law to the contents and presenta-tion of the annual accounts, along with the associated accounting principles and evaluation rules.
Note 3 – Principles and evaluation methods
3.1 General principles
The annual accounts have been drawn up in accordance with legal and regulatory provisions in force in Lux-embourg. The accounting policies and the valuation principles, as well as being governed by legal regulations, have been determined and implemented by the Board of Directors.
3.2 Main valuation principles
The main valuation principles adopted by the Company are as follows:
3.2.1. Intangible assets
Intangible assets are valued at their historic purchase price, which includes related charges, or at their pro-duction cost, following deduction of cumulative value adjustments and amortisation. A depreciation rate of 33.33% is applied linearly to software.
LuxairGroupNotes accompanying the annual accounts 2
3.2.10 Provisions for risks and charges
Provisions for risks and charges are established to cover the charge or debts the nature of which is clearly defined, but which at the closing date of the financial statements are probable or certain but unknown as regards their total amount or date of occurrence.
3.2.11 Provisions for large-scale maintenance of aircraft
The large-scale maintenance costs are divided among the relevant financial years according to the number of flight hours and estimated external costs, by way of the creation of provisions for major inspections accounted for under the section “External charges: maintenance and servicing of airplanes”.
When carrying out major maintenance, the costs are charged to the profit-and-loss account under the specific expense accounts.
A reversal of provisions is immediately recorded in the “Reversal of provisions” account under the “Other oper-ating income” section.
3.2.12 Prepayments and accrued income – assets
This item includes charges recorded before the closing date of the financial statements, which are attributable to a subsequent year.
3.2.13 Accruals and deferred income – liabilities
This item includes income received before the closing date of the financial statements, which is attributable to a later year. The majority is made up of transport tickets which have been issued but not yet used.
3.2.14 Value adjustments
Value adjustments are deducted directly from the asset concerned.
3.2.15 Net turnover
For air transport operations, turnover is recorded when the transportation service is provided. External charges payable on transactions paid to intermediate parties are also recorded on this basis. Tickets for transport which have not been used are recorded as turnover following a systematic recording schedule.
Revenue linked to other services provided is recorded at the time of the provision of the service, deduction having been made of sales reductions, as well as value added tax and other taxes directly linked to turnover.
3.2.6. Transferable securities
Transferable securities are valued at their purchase cost, expressed in the currency in which the annual accounts are drawn up. Their value is adjusted when the purchase price exceeds the market price or the guaranteed future price. These value adjustments remain active until the reasons for their implementation cease to exist.
3.2.7. Receivables in banks, in postal accounts, cheques and cash
Receivables in banks, postal accounts, cheques and cash includes all liquidity in transit which has not yet reached the bank accounts.
3.2.8 Currency conversion
The Company draws up its accounts in Euros (EUR, €): the assets and liabilities statement and the profit and loss account are expressed in this currency.
Income and charges in currencies other than the currency of the balance sheet are converted into the balance sheet currency at the exchange rate in force on the transaction date.
Monetary assets and liabilities and short term items which appear as assets and liabilities on the balance sheet and which are denominated in other currencies, are converted at the exchange rate in force at the closing date of the financial statements.
Exchange rate gains achieved are recorded on the profit and loss account under “Other operating income”, and exchange rate gains not achieved are recorded as liabilities under the heading “Accruals and deferred income”, while exchange rate losses, whether achieved or not achieved, are included under “Other external charges”.
3.2.9. Derivative financial instruments
- The Company uses derivative financial instruments in order to reduce its exposure to risks linked to the volatil-ity of the price of kerosene and of the dollar. A hedging policy has been put in place. The charges and income inherent in the hedging contracts are entered into the accounts in the same accounting periods as those in which the kerosene consumption is hedged. Estimated latent losses on the contracts hedging kerosene requirements as at 31.12.2010 are EUR 400,493. Estimated latent gains on the contracts hedging kerosene requirements as at 31.12.2010 are EUR 3,091,032.
- Estimated latent losses on the contracts hedging EUR/USD for Cargolux shares held in view of their resale (car-rying) are EUR 2,463,414 as at 31.12.2010.
- The estimated latent losses on EUR/USD hedging contracts for the purchase of aircraft are EUR 506,973 as at 31.12.2010. The latent gains are EUR 128,117.
- The estimated latent losses on EUR/USD hedging contracts for the leasing of aircraft are EUR 172,838 as at 31.12.2010. The latent gains are EUR 453,631.
LuxairGroupNotes accompanying the annual accounts 3
Note 4 – Immobilisations corporelles et incorporelles
Les mouvements de l’exercice se présentent comme suit :
Concessions and licences purchased
Aircraft Land and construction
Plant machinery and equipment
Other installations, tools and furniture
Payments on account and assets under construction
Total
EUR EUR EUR EUR EUR EUR EUR
Gross book value at start of year 2,602,689 250,809,880 85,743,104 86,654,708 42,474,595 5,287,120 473,572,096
Additions during financial year 0 0 26,500 2,533,909 1,176,484 4,909,235 8,646,128
Disposals during financial year 0 (23,556,126) (438,768) (3,375,891) (4,188,512) 0 (29,414,856)
Transfers during financial year 0 0 0 0 0 0 0
Gross book value at year end 2,602,689 227,253,754 85,330,836 85,812,726 41,607,008 10,196,355 452,803,368
Value adjustments at start of year (2,596,491) (178,784,943) (45,240,676) (76,631,941) (37,419,162) 0 (340,673,213)
Endowments during the year 0 (10,729,804) (3,640,160) (3,521,046) (2,349,304) 0 (20,240,314)
Write-backs during the year 0 23,556,126 307,137 3,324,326 2,023,419 0 29,211,008
Exceptional value adjustments 2,708,688 2,708,688
Value adjustments at year end (2,596,491) (163,249,933) (48,573,699) (76,828,661) (37,745,047) 0 (328,993,831)
Net book value at year end 6,198 64,003,821 36,757,137 8,984,065 3,861,961 10,196,355 123,809,537
Net book value at previous year end 6,198 72,024,937 40,502,428 10,022,767 5,055,433 5,287,120 132,809,883
No addition provision is recorded for the Boeings and Embaraer 145s. The existing provisions have been listed under “Exceptional income”.On 31.12.2010, the additional provision for the Embraer 135s was EUR 972,934.
LuxairGroupNotes accompanying the annual accounts 4
Note 5 – Financial assets
The movements during the financial year were as follows:
Interests Receivables from associated companies
Shares in associated companies
Securities classified as assets
Other loans Own shares
EUR EUR EUR EUR EUR EUR
Gross book value at start of year 62,166,907 36,345,865 17,758,922 139,814 200,777 4,635,609
Additions during the year 8,325,281 25,848
Disposals during the year (20,180,181) (5) (30,670)
Gross book value at year end 62,166,907 24,490,965 17,758,922 139,809 195,955 4,635,609
Value adjustments at start of year
Write-backs during the year
Value adjustments at year end 0 0 0 0 0 0
Net book value at year end 62,166,907 24,490,965 17,758,922 139,809 195,955 4,635,609
Net book value at previous year end 62,166,907 36,345,865 17,758,922 139,814 200,777 4,635,609
LuxairGroupNotes accompanying the annual accounts 5
Note 5 – Financial assets (continued)
The firms in which the Company holds at least twenty per cent of the capital, directly or indirectly, are as follows:
Nom de la société Registered Offices Portion of equity held Date of last year end Own shares at year end in the company
Result of previous financial year
% EUR EUR
Subsidiary companies
Air Pub S.à r.l. Niederanven 100% 31.12.2009 25,400 359
Airrest S.A. Niederanven 99% 31.12.2009 602,060 14,702
Luxair Commuter S.A. Sandweiler 99% 31.12.2009 (5,351,056) (3,460,112)
Luxair Finance S.à r.l. Sandweiler 100% 31.12.2009 192,844 1,648
Luxair Cargo Deutschland GmbH Frankfurt 100% 31.12.2009 213,019 (351,246)
Luxair Re S.A. Luxembourg 99.96% 31.12.2009 2,500,000 -
Eurocargo S.A. Sandweiler 100% 31.12.2009 (31,868) (38,690)
Luxair Immobilière S.à r.l. Munsbach 100% 31.12.2009 4,848,729 (88,010)
Luxair Commuter & Cie S.e.N.C. Sandweiler 0.1% 31.12.2010*
Associated companies
Cargolux Airlines International S.A. Niederanven 52.05%** 31.12.2009 426,745,019 (108,646,380)
Luxair Executive S.A. Sandweiler 51% 31.12.2009 365,000 4,466
Luxfuel S.A. Niederanven 40% 31.12.2009 3,533,998 1,339,237
In relation to the shares held in Cargolux Airlines International S.A., it is to be noted that the company has included a note on these commitments in their annual accounts. This note refers to the various investigations and legal actions initiated by the competi-tion authorities (antitrust) against several freight airline companies, including Cargolux, relating to an alleged breach of antitrust rules. In this regard, Cargolux has recorded an amount of EUR 79.90 million to be paid, corresponding to the fines imposed by the European Commission and has appealed this decision.
In 2010, the group also concluded settlement agreements and/or agreed to pay fines to the competition authorities in Canada and South Korea. Cargolux has created a provision of USD 8 million for proceedings brought by New Zealand and Switzerland. For the class action complaint filed in the United States, at the end of 2010, Cargolux agreed a settlement with the complainants under which it commits to pay a total discounted amount of USD 35.1 million. However, the complainants still have the option until the end of June 2011 to reject this settlement agreement and launch individual lawsuits.
No provision has been created for other civil actions.
* The company Luxair Commuter & Cie S.e.N.C. was created on 2 December 2009 and is 99.9% held by Luxair Commuter S.A.** The percentage of shares held by Luxair on 31.12.2010 rose to 52.05%, of which 14.60% are considered as equity interest.
LuxairGroupNotes accompanying the annual accounts 6
Other reserves – special reserveThe company had placed in unavailable reserves a total corresponding to five times the amount of the wealth tax for previous financial years. The period of unavailability of this reserve is five years from the year following the year of allocation.
2010 2009
EUR EUR
Special wealth tax reserve 12,500,000 24,086,500
Free reserve 222,140,982 205,554,482
In the absence of results, this distribution could not take place in 2010.
Exempt capital gainsAn exempt capital gain was achieved in 2008 on the contribution of land to the company Luxair Immobilière for the sum of EUR 3,341,646. The capital gain was directly reinvested in the holding “Luxair Immobilière“ in accordance with article 54 of the LIR.
Note 8 – Provisions for risks and charges
Provisions for pensions and similar obligationsThe Company has put in place for its staff a non-contributory, extralegal provident scheme. At the closing date of the financial year, the provision totalled EUR 23,328,873.
The related reinsurance reserve appears in the assets section of the balance sheet under the heading “Other receiva-bles“ for EUR 3,976,222.
Provisions for taxesThe provisions for taxes represent the taxes due as estimated by the Company for the financial years for which definitive tax statements have not yet been received. Taxes paid in advance appear under the item “Other receivables” under the assets section of the balance sheet.
Other provisionsThe item “Other provisions“ mainly includes the provision for restructuring, for a sum of EUR 606,312 (initially established in 2005), a sum of EUR 2,414,466 for disputes in progress, a sum of EUR 693,125 for IT projects in progress as well as a sum of EUR 6,622,360 as provisions for operating charges. The building design provision remains open for up to EUR 25,927.
Note 6 – Other receivables
The item “Other receivables” mainly consists of:
2010 2009
EUR EUR
Reinsurance fund for staff non-contributory provident scheme (Note 8)
3,976,22 4,461,416
Advances on taxes paid as contributions 1,781,985 1,710,000
Other 2,371,891 2,799,100
Total 3,130,098 8,970,516
Note 7 – Shareholders’ equity
Movements during the financial year for the item “Shareholders’ equity” (in Euros)
At 01.01.2010
Allocation of 2009 result
Movements during year
Result for 2010 financial year
At 31.12.2010
EUR EUR EUR EUR EUR
Subscribed share capital 13,750,000 13,750,000
Legal reserve 1,375,000 1,375,000
Reserve for own shares 4,635,609 4,635,609
Other reserves 229,640,982 5,000,000 234,640,982
Results reported 6,788,162 (3,677,431) 3,110,731
Dividends 0 0
Exempt capital gain 3,341,646 3,341,646
Result for the year 1,322,569 (1,322,569) 8,927,455 8,927,455
Total 260,853,968 269,781,423
Subscribed capitalSubscribed share capital has increased to EUR 13,750,000 and is represented by 110,000 shares, each with a nominal value of EUR 125, fully issued.
Legal reserveIn accordance with the law of Luxembourg on limited companies, the Company has established a legal reserve of ten per cent of its share capital during previous financial years. This reserve is non-distributable.
Reserve for own sharesThe Company has previously acquired its own shares for a total of EUR 4,635,609, recorded as assets on the Com-pany’s balance sheet. In accordance with the law of Luxembourg on limited companies, the Company has estab-lished an unavailable reserve which is included under the item “Reserve for own shares“ for the same amount.
LuxairGroupNotes accompanying the annual accounts 7
Note 11 – Personnel expenses
The Company employed an average of 2,317 full-time staff during the financial year, categorised as follows:
2010 2009
Ground staff 1,206 1,195
Pilots 154 155
Cabin crew 145 140
Manual workers 812 844
Total 2,317 2,334
The personnel expenses for the financial year can be broken down as follows:
2010 2009
EUR EUR
Wages 111,826,386 111,623,789
Social security contributions on wages 15,757,267 14,915,231
Provident scheme 3,574,146 3,772,828
Other social security contributions 58,706 57,345
Total 131,216,505 130,369,193
Note 9 – Payables
Apart from payables due to banks, the Company payables are due to be repaid within one year. Payables due to banks are comprised as follows:
2010 2010 2010 2010 2009
Less than 1 year
1 to 5 years
More than 5 years
Total Total
EUR EUR EUR EUR EUR
Loans for purchase of airplanes
Boeing 737 700 LX-LGQ 3,000,000 7,500,000 0 10,500,000 13,500,000
Boeing 737 700 LX-LGR 3,000,000 6,750,000 0 9,750,000 12,750,000
Boeing 737 700 LX-LGS 3,000,000 10,500,000 0 13,500,000 16,500,000
Total Boeing 9,000,000 24,750,000 0 33,750,000 42,750,000
Bombardier Q400 LX-LGA 1,000,000 4,000,000 1,500,000 6,500,000 7,500,000
Total Bombardier 1,000,000 4,000,000 1,500,000 6,500,000 7,500,000
Total Aircrafts 10,000,000 28,750,000 1,500,000 40,250,000 50,250,000
Other bank loans
Expansion of cargo centre 687,500 2,750,000 687,500 4,125,000 4,812,500
Total 10,687,500 31,500,000 2,187,500 44,375,500 55,062,500
Note 10 – Net turnover
Breakdown of turnover by activity category:
2010 2009
EUR EUR
Luxair Luxembourg Airlines 124,629,757 119,706,171
LuxairTours 196,227,117 187,806,225
CargoHandling 78,219,328 67,575,415
Other activities 9,749,124 7,690,709
Total 408,825,327 382,778,520
The item “Other activities” includes revenue from airport support services and catering, sales from “Airport Shops”, and other activities.
LuxairGroupNotes accompanying the annual accounts 8
Note 12 – Remuneration of the Board of Directors
A net total of EUR 80,220 was allocated to the Directors and to the Government auditor.
Note 13 – Other operating charges
2010 2009
EUR EUR
Wealth tax 700,000 900,000
Other 301,041 212,731
Total 1,001,041 1,112,731
Note 14 – Exceptional income
The item “Exceptional income” includes the following elements:
2010 2009
EUR EUR
Recovery of taxes from previous years 223,285 1,492,039
Recovery of provisions 0 5,775,939
Sale of airplane LX-LGP 2,342,652 0
Recovery of exceptional correction of value of airplanes 2,708,688 0
Beneficial interest PP risk component 1,304,231 0
Other 87,108 0
Total 6,665,964 7,267,978
Note 15 – Exceptional charges
The item “Exceptional charges” includes the following elements:
2010 2009
EUR EUR
Compensation and appeals 0 473,545
Increase in exceptional value adjustment on aircraft 0 759,788
IT projects 0 251,651
Exceptional fees 78,088 0
Total 78,088 7,267,978
Note 16 – Off-balance sheet commitments
Financial commitments may be broken down as follows:
2010 2010
EUR EUR
Bank guarantees for third parties 99,092 99,092
Bank guarantees for companies with participating interest 173,525 173,525
Firm orders for aircraft 79,655,028 10,304,430
Forward purchase of currencies 92,828,126 72,633,917
Forward purchase of kerosene 26,994,804 20,275,322
Note 17 – Other operating income
This item consists among others of recovery of provisions for major inspections.