Company Overview
Operations
SkyEurope is one of Europe’s fastest growing low cost low fare passenger airlines ("LCCs"), with a focus on services to and from Central and Eastern Europe. From our bases in Bratislava, Prague and Vienna, we offer convenient, short-haul "point-to-point" scheduled services to 41 cities in 19 European countries.
Strategy
Effective with the Winter 07/08 schedule, we have reallocated our capacity from our Budapest and Krakow bases to Vienna, Bratislava, and Prague to consolidate and concentrate on selected attractive markets, thus gaining strength and economies of scale at the base level. A large part of our capacity (6 aircraft) is now based in Vienna to take advantage of the less seasonality, strong incoming and outgoing markets and a population with higher disposable income vs the EU average.
We target both leisure and business travellers, as well as travellers visiting friends and relatives ("VFRs"). Our network comprises routes that connect cities within Central Europe as well as between Central and other popular desistanations within Europe. We developed our network using a business model that aims to stimulate "point-to-point" local market demand for flights to other destinations already served by existing bases in our network. We refer to this as "joining-the-dots" in our network. We are now focusing on increasing the frequencies to our current destinations in order to provide a convenient schedule that is attractive to the leisure passenger but will also attract higher fare paying business passengers. The implementation of this business model has allowed us to become the largest LCC based in Central Europe, based on our current fleet size.
SkyEurope aims to differentiate itself by offering a superior product at competitive fares. This is achieved by using brand new Aircraft, flying to convenient airports, offering assigned seating and a wide variety of other optional services such as on board catering, access to airport lounges, etc. SkyEurope also focuses on providing excellent on-time performance to its passengers. This product differentiation is done with a focus on minimizing costs. We have an optimized network to ensure high aircraft and crew utilization; we aim at keeping our operations simple to reduce complexity and hidden costs; and we focus on overhead reduction by rationalizing headcount and enforcing strict spending and budgetary controls.
SkyEurope is in a period of consolidation with profitability at the forefront and in the near term, our growth will come through improved aircraft utilization and the addition of 1 Aircraft in 2008. However, consistent with our business plan and future capacity requirement, we have a large number of Aircraft deliveries scheduled for 2009 through 2012 which will facilitate our growth strategy as we explore additional destinations and potential future bases.
History
SkyEurope Airlines was established in September 2001. We began flying passengers on a single domestic route in the Slovak Republic in February 2002 using a 30-seat Embraer 120ER aircraft, becoming the first LCC to commence operations in Central Europe. Our business development strategy initially sought to serve unsatisfied demand and stimulate additional demand in the Slovak Republic for air travel services in what had previously been an underserved air transport market that lacked an LCC alternative for flights to destinations within Central and Eastern Europe, and that also lacked any regular scheduled direct service to destinations in Western Europe. As we continued to meet this demand, we began to stimulate demand for additional routes and we used capital raised on a number of subsequent occasions to expand the reach of our network beyond the Slovak Republic. To do so, we established additional bases in other countries with the potential for additional demand stimulation and shifted the focus of our fleet composition away from our regional 30-seat Embraer aircraft through longer-range 133-seat Boeing 737-500 (Classic) aircraft towards 149-seat Boeing 737-700 (Next Generation) aircraft.
SkyEurope Holding AG has been publicly traded since September 2005, and since then we have raised approximately €120 million (gross) of equity capital. Our shares have since then been listed on the Vienna and Warsaw Stock Exchanges, reflecting the Central European focus of our operations. As a result, we became, and remain, the only LCC to be listed in Central Europe.
Fleet
SkyEurope operates the youngest fleet in Europe, consisting of 15 (fifteen) brand new 149-seat Boeing 737-700 (Next Generation) aircraft (each an "Aircraft"). 12 (twelve) Aircraft were delivered between March 2006 and May 2007 and represent the first twelve deliveries of an order for 16 Aircraft made in April 2005. These twelve aircraft were leased to SkyEurope under operating leases, each with a term of eight years. Two further Aircraft were delivered by Boeing in July and August 2007 and are financed by the Bank of Scotland Corporate and SkyEurope's newest aircraft was delivered in April 2008 and was financed through a sales operating lease back transaction with a term of 8 years.
In addition, SkyEurope exercised purchase rights for a further ten Aircraft from Boeing for delivery prior to the end of May 2014. We have purchase rights for a further three Aircraft of the same type for delivery prior to the end of 2012.
Passenger volumes
The expansion of our fleet and network has been, and continues to be, driven by the demand for low-cost low-fare airline services in Central and Eastern Europe, which is reflected in the significant growth in our volume of passengers. Our passenger volumes have increased substantially, from 167,535 in the year ended 31 December 2003 to 3,756,144 in the rolling 12 months ended 31 August 2008, the latter representing a load factor of 84.9 percent for the period. Since its inception until August 2008 SkyEurope has transported over 11,9 million passengers.