Bloomberg News

Air Berlin Says Quarterly Ebit Dropped 44%, Plans Bond Sale

October 26, 2011

(Updates with analyst’s comment in fourth paragraph.)

Oct. 26 (Bloomberg) -- Air Berlin Plc, Europe’s third- biggest discount airline, said third-quarter earnings dropped 44 percent because of air-travel taxes and the cost of fuel, and outlined plans for a bond sale.

Earnings before interest and taxes fell to 96.8 million euros ($135 million) from 171.7 million euros a year earlier, the carrier said in a statement yesterday. The company was expected to post third-quarter Ebit of 138.5 million euros, according to the median estimate of two analysts. Operating expenses increased by 17 percent to 1.28 billion euros, while revenue rose 11 percent to 1.38 billion euros.

Chief Executive Officer Joachim Hunold quit in August after 20 years in charge and the Berlin-based carrier announced plans to slash routes, reduce flights to remaining destinations and ground planes in an effort to stem mounting losses. The carrier said earlier yesterday that it will postpone the purchase of 19 aircraft in 2012 and 2013, cutting investments by $508 million next year and about $1.13 billion in 2013.

“The third quarter was weak, there’s no doubt about that; in the short term, the reaction will be negative,” Juergen Pieper, a Bankhaus Metzler analyst in Frankfurt who recommends buying Air Berlin stock, said in a phone interview. “The long- term view has improved because of the management changes and the tough program that has been introduced.”

Air Berlin fell as much as 1.3 percent to 2.61 euros and was down 1 percent as of 9:40 a.m. in Frankfurt trading. The stock has dropped 29 percent this year, valuing the airline at 223.3 million euros.

The bond sale, to refinance existing debt, will initially total as much as 100 million euros and may be increased by as much as 50 million euros, Air Berlin said. The bonds, which will have a coupon of 11.5 percent, will be redeemed on Nov. 1, 2014. Following placement of the bonds, which will be issued on or around Nov. 1, the airline will offer to buy back its 1.5 percent convertible bonds issued in 2007.

“The interest rate is very high,” Pieper said. “That tells you everything. It reflects the weak position of Air Berlin.”

The carrier is scheduled to publish detailed third-quarter results on Nov. 17.

--Editors: Tom Lavell, Robert Valpuesta

To contact the reporters on this story: Steve Rothwell in London at srothwell@bloomberg.net; Blanche Gatt in London at bgatt@bloomberg.net

To contact the editors responsible for this story: Ben Livesey at blivesey@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net


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