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Fiji Airways Group Announces FY19 Financial Results

 

National airline increased passenger numbers, revenue and profits from prior year despite massive fuel, forex and competitor headwinds. 

21 August 2020: The Fiji Airways Group has today released its financial results for the period ending 31 December 2019. Key highlights are as follows: 

  • Group revenue increased by 9% to FJ$1.12 billion compared to FJ$1.02 billion for the previous Financial Year, the second consecutive year the Group crossed the F$1 billion mark for revenue. 
  • Group Profit before Tax was FJ$ 61.2 million, compared to FJ$ 55.3 million in the previous Financial Year. 
  • Group Operating Profit Before Tax was FJ$ 58.9 million, compared to FJ$ 50 million in the previous Financial Year. 
  • The Group increased passenger numbers by 2% despite the significant impact of Qantas commencing flights from Sydney to Nadi in March 2019, carrying 1.7 million passengers in 2019 (compared to 1.67 million passengers during the previous Financial Year). 

Mr. Andre Viljoen, Fiji Airways Managing Director and CEO, said: “The operating environment pre-COVID was already very challenging, with lots of factors adversely affecting profitability. Despite these challenges, the Fiji Airways Group grew profits by 10.7% year on year, while also outperforming the previous year in terms of revenue and passenger numbers. 2019 saw some major investments in our fleet, customer service and infrastructure, including the acquisition of two brand new A350-900 XWB aircraft, and the completion of the state of the art Fiji Airways Aviation Academy. Our key achievements in 2019 included being the launch oneworld connect partner airline, and attaining the coveted Skytrax 4-Star rating through enhanced service delivery on the ground and in the air.” 

Fijian Attorney General and Minister of Economy, Hon. Aiyaz Sayed–Khaiyum said: 

“I would like to thank the Chairman, Board, the CEO and his leadership Team. Notwithstanding the challenge of Qantas competing directly with Fiji Airways in 2019, it made a profit that year. From the profits of 2019, Fiji Airways has been able to fund their commitments after the global spread of COVID-19. Fiji Airways has a profit-sharing programme and Government as the majority shareholder is appreciative of Fiji Airways Board’s decision to share the 2019 profit, notwithstanding the challenges posed by COVID-19. Every single employee of Fiji Airways as at 31 December 2019, apart from the Executive Leadership, will receive $1000 as their share, whether currently employed or not.” 

Fiji Airways increased frequencies to most destinations, and completed its first full year of services to Tokyo, Japan in 2019. The airline concluded six new codeshare agreements with Alaska Airlines, Air India, British Airways, Finnair, Japan Airlines and Singapore Airlines, expanding its network to 20 direct destinations, and increasing its total destination reach (including codeshare) from 69 to 108 destinations. 

Mr. Viljoen added: “In the face of a number of significant market challenges in 2019, we undertook a relentless cost saving exercise which was a thorough 360 degree review of all operational expenses. We re-negotiated contracts, revamped product offerings, implemented best practices and enhanced crew and fuel management. These actions generated cost savings of FJ$ 41 million, which is a massive accomplishment. Fiji Airways also conducted a business model review, which included a ‘clean sheet’ review of our current network and future opportunities, which independently verified that our 10-year strategic plan is on track.” 

“In December, our pilots started utilising the Fiji Airways Aviation Academy for recurrent and specialist training on the Airbus A330 and Boeing 737 full flight simulators. This investment is an immediate cost saver as well as a revenue generator for our airline, through the sale of simulator time to other airlines. The opening of this state of the art facility was timely, as the prevailing border restrictions would make it very difficult for us to send our pilots overseas for training. This would in turn further delay resumption of inbound tourism, in an even sever below to the Fijian economy.” 

The Fiji Airways Group faced severe headwinds in 2019. Chief amongst those were high fuel prices and fierce competition from 46% shareholder Qantas. 

“Fuel price continued to spiral upwards in 2019 and resulted in a year on year fuel cost increase of FJ$29 million. The ongoing volatility of fuel prices validates our fleet modernisation campaign decisions, in selecting brand new fuel efficient latest generation aircraft like the Boeing 737 MAX and the Airbus A350.” 

“Qantas commenced direct Sydney-Nadi services on 31 March 2019 in direct competition with Fiji Airways. Qantas entered the market at the start of an already sluggish off-season period, and the resultant excess capacity negatively impacted yields. Loss of market share to Qantas, together with the drop in yields, dramatically reduced the profitability of our Australian operations, resulting in a negative impact upon profitability of around FJ$65 million.” 

“Unfavourable foreign currency fluctuations were another factor, with the strengthening of the US dollar resulting in an increase in operating costs of FJ$11 million in 2019.” 

Mr. Viljoen noted that the global grounding of the Boeing 737 MAX aircraft created additional operating complexities for the airline. To fill the gap left by the grounded Boeing 737 MAX aircraft, Fiji Airways had to ‘wet-lease’ additional Boeing 737 NG aircraft (with operating crew), and used larger A330 aircraft to maintain its schedule. 

“The revenue losses and cost increases incurred as a consequence of the Boeing 737 MAX grounding were significant, but I am pleased to announce that the Company was successful in negotiating a settlement with Boeing.” 

Fiji Airways Chairman, Mr. Rajesh Punja, said that Fiji Airways is now focused on survival, given the devastating and ongoing impacts of the COVID-19 Pandemic on global aviation. 

“We are in the midst of the biggest crisis in the history of our industry, and we are focused on ensuring that Fiji’s national carrier not only survives this Pandemic, but thrives in the post COVID-19 ‘new normal’ environment. No stone has been left unturned in our efforts to cut costs and preserve and bolster cash reserves, at a time when many airlines around the world are faltering. Even the largest and most profitable airlines have turned to financiers and Governments for assistance. Fiji Airways is grateful for the support of our financiers who have supported us with new loans, our lessors who have offered aircraft rent payment deferrals, and of course the Fijian Government for approving a sovereign guarantee scheme to support our financing actions.” 

There is a growing consensus in the aviation industry, supported by IATA, that the post-COVID-19 ‘new normal’ level of travel demand will only be 70 to 80% of pre-COVID-19 levels. 

Mr Punja added: “It is obviously important to be nimble, and to take the expected ‘new normal’ levels of demand into account when planning for the future. Simply put, future revenues will likely be significantly lower than pre-COVID-19 levels. Fiji Airways, like other prudent airlines, is already implementing steps to align with this future expectation.” 

Mr. Punja further stated: “In mid-2019, we faced the very real prospect of a FJ$100 million loss due to the impact of competition and fuel price increases. However, the Fiji Airways and Fiji Link teams once again demonstrated grit and resilience to deliver these results. Despite their small size, our airlines continued to punch way above their weight. Management worked tirelessly to save costs and drive yield improvements from across the network to deliver the 2019 results. The profits that we have just announced are part of our cash reserves that, along with our debt financing actions, will tide us through the current crisis.” 

Mr Punja continued: “We have overcome adversities before, and despite the current Pandemic mega-shock to the world economy, we will do absolutely everything we can to spur Fiji’s economic recovery.” 

Fiji Airways and Fiji Link currently operate up to 10 freighter services per week, maintaining vital supply chains for exports, trade and medical supplies. This protects primary industries and jobs for Fijians and Pacific Islanders. 

Mr. Viljoen highlighted that Fiji Airways is currently working to finalise two campaigns which will be critical to the recovery of both the airline and the Fijian tourism industry. The Travel Ready campaign is aimed at ensuring the medical safety and wellbeing of passengers and staff in a COVID-19 world, and the Bula Bubble Campaign will facilitate the return of visitors to Fiji within the proposed Bula Bubble framework announced by the Fijian Government.

 “We are certainly not sitting back and waiting for border restrictions to ease. I can assure all of our valued customers, stakeholders and partners that all of us at Fiji Airways and Fiji Link are working tirelessly to put measures in place which will ensure your health and safety, and to create incredibly enticing holiday packages, so that as soon as border restrictions ease, we can welcome you back to our beautiful shores with peace of mind.”  

FY2019 Financial Media Release

 

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