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Adria Airways Slovene Airline Company 4th Vienna Economic Forum Tomaž Škofic Depuity V.P. Sales & Marketing. Vienna, 6 November 2007. Company history. 1961 ● establishment of the charter airline Adria Aviopromet, operating DC- aircraft, end of the sixties purchase of DC-9 aircraft.
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Adria AirwaysSlovene Airline Company4th ViennaEconomic Forum Tomaž ŠkoficDepuity V.P. Sales & Marketing Vienna, 6 November 2007
Companyhistory • 1961 ● establishment of the charter airline Adria Aviopromet, operating DC- • aircraft, end of the sixties purchase of DC-9 aircraft. • 1984 Adria becomes a member of the IATA.Starts developing scheduled serviceswith: DC-9, MD-80 and Dash 7 aircraft. Fleet: DC 9, MD 80, Dash 7 aircraft. • 1989 ● Purchase of first Airbus A320 aircraft. • 1991 ● On 25 June, the Republic of Slovenia declares independence, for political reasons Adria is grounded for three months. • 1992 ● End of January operations restarted in a significantly reduced market. The structure of operations is markedly changed, from primarily a charter airline to a mainly scheduled service carrier.
Company history • 1995 ●Start of cooperation with Lufthansa, inclusion in European integration processes. • 1998 ●Purchase of three new CRJ 200 aircraft. • 2000 ●Purchase of fourth CRJ 200. • 2001 ● The first scheduled flight in the EU, from Vienna to Frankfurt. • 2002 ●Adria selected as first European authorised Bombardier maintenance centre for CRJ aircraft. • 2004 ●Adria joins the global association of airlines, Star Alliance, as a regional member. • 2005 ●Purchase of fifth new CRJ 200 aircraft; openingof a new hangar. • 2006 ● In November, Adria starts introducing e-ticketing. • 2006 ● In December, Adria carries more than one million passengers for the first time in the independent Slovenia. • 2007 ● Purchaseoftwonew CRJ 900 aircrafts.
Start Reorganisation Future of business operation 2005 2006 2007 2008 ProblemsSolutionsStabilized operating, furtherexperiencebaseddevelopment
Difficultsituation in 2005 • Extensiveloss in theamountof 9,6 mio EUR • Inadequatefleet (gap between the 48-seater and the 162-seater) • Globaldrop in ticketprices • Globalincrease in oilprices • Lackofcontrolingoffinancialrisk • Lackofplanningandcreatingofreservesforaircraftinvestmentmaintenence • Highoperatingcosts (airporthandling, catering) • Highfinancialcosts • Cashflowproblems
Measuresfortheimprovementofbusinessoperation Measuresforincreasingtherevenues Revenues from scheduled passenger services • Stop furtherdecreasingofthevalueofpassengercoupon (sticterlimitationofpromotionalfares, general fare increase, increaseoftariffadd-ons, RSFsand No-showcontrol) • Reorganizationofrevenuemanagementprocess • Insateing new routes • Addingnewfrequencies
Measuresforincreasingtherevenues Revenues from charter services • Charter services remain complementary services to the scheduled services and are aimed at optimising returns and not primarily at increasing the volume. Revenues from maintaining aircraft for third parties • Maintain the leading position in maintenance of CRJ100/200/700/900 • Expansion on the C-checks market for Airbus A-319/320/321 aircraft • Building of a new hangar.
Measuresforincreasingtherevenues Otheroperatingrevenues • More activeandinovativeapproach to marketingofourownmedia (the In-flight magazine and aircraft interiorandexterior) • Activemarktingof Adria Airways web site • Furtherdevelopementofourown pilot trainingresourcesandfacilities
Cost Management Directoperatingcosts • Fleetoptimisation - Leaseoftwo A320 aircraft in “wetlease” - Due to too large gap between the Canadair CRJ-200 and the Airbus A320 aircraft, we leased two intermediary capacity aircraft with crew - Purchaseoftwonew CRJ 900 aircrafts. - Loweroperatingexpenses - Betteroccupancyoftheaircraft - Optionsfor CRJ900 and CRJ1000
Cost Management Directoperatingcosts • Mitigating high prices of kerosene through certain measures: - selecting the most competitive offer - planning the use of aircraft appropriate to the number of passengers; - adding offuel surcharge - use of financial derivatives • Reviewingcontractswithindividualairports to achievesignificantsavings in airportcharges
Cost Management DirectOperatingcosts • Maintenance costs - Challengeofcostmanagement in fleetinvestmentmaintenance - Signing a contractwiththemanufactureroftheenginesforthe A320, IAE, to maintainengines and forpaymentofcostsbyengineflighthours; advantages: • An easingofcashflows • Equaldistributionofcostsoveryears • Lowermaintenancecosts
Cost Management Indirectoperatingcosts • reductionofcabinservices • rationalisation of distribution network • reorganisationofcompanystructure and jobdescriptions (introducingstimulatingsalarysystemwithvariable part ofhesalary) • outsourcingofcertainactivities (maintenenceof IT systems, general purchasing, cleaning…)
Cost Management Non – operatingresult • Refinancingofthemajorityoflong-term foreigncurrencyloans; replacingfixedhigh-interestDollarsloans to Euros and cheapersourcesof finance • cash-flow was improved due to the moratorium on repayment of the principal • Savings in financialcosts • Adoptionof a financialriskmanagementstrategy in order to achieveeffectiveandsystematicriskmanagement - interestraterisk - currencyrisk - riskassociatedwithfuelpricechanges.
Miscellaneous • Intensivelyprogressingwiththeelectronicticketproject • Continuingwiththe trend of encouraging internet sale and other modern sales channels. • Buildingnewheadquarters and centraliseingthecompany in one location. • Organisationofeffectivecontrolling; primarilybyestablishing profit and costcentres. • Effectivemanagementof IT system.
Results • Continuous improving of load factors.
Summery • Striving to becameleadingcarrier in theBalkans • Striving to expend and optimizethefleet • Remainthemainmaintenance centre for CRJ aircraft • Profiting Slovenia’s forthcoming EU Presidencyforprovingourexcellence and improvingourbusinessresults
Adria Airways Fleet 3 Airbus A320 2 Canadair Regional Jet 900 7 CanadairRegionalJet 200