Higher yields drive surging profits
By Cathy Buyck, ATW Online | Apr. 05, 2006
Bmi Group reported a pre-tax profit of ?10 million ($17.3 million) in 2005, nearly four times greater than the ?2.6 million earned in 2004.
Turnover rose 4.7% to ?869 million from ?830.1 million on a 6.3% increase in RPKs to 9.33 billion. Operating result before exceptional items moved from a loss of ?3.2 million in 2004 to a profit of ?5.5 million in 2005. Segment information on the performance of each of the group's operations--the mainline based at London Heathrow, bmi regional and its low-cost subsidiary, bmibaby--was not provided.
"Our concentration on higher yields, better resource allocation and cost control has delivered a good foundation for future growth," Chairman Michael Bishop said.
The company added three aircraft in 2005, bringing its fleet to 60 and helping boost ASKs 7.5% to 13.1 billion. The launch of long-haul routes from LHR to Mumbai and Riyadh also contributed. Load factor slipped 0.9 point to 71% and passenger boardings remained static at 10.5 million.
"We are willing to accept volume reductions in certain markets if it improves overall levels in yield, resulting in increased profitability," Bishop said, referring to mainline operations. The group completed its fleet rationalization program and introduced a new strategy for its poorly performing operations at LHR last August, based on a more flexible fare and service structure.
Bishop continued to refuse comment on his future ownership plans in Bmi Group, in which he holds a controlling stake of 50% plus one share. Lufthansa holds 30% minus one share and SAS AB owns 20%. UK press regularly reports that Bishop intends to exercise an option to sell his stake to Lufthansa for ?330 million ($398.9 million) to avoid having to absorb losses from the joint venture the three shareholders have for the short-haul operations out of LHR. Under terms of the JV, Lufthansa and SAS absorb up to 90% of the losses while bmi has been underwriting just 10%. The deal ends in December 2007. Last November, the Financial Times reported that SAS is keen to dispose of its holding.