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Transcript of Adria Airways - Annual Report 2004
Adria Airways d.d.
Annual Report 2004
4
Adria Airways d.d.
Annual Report 2004
4
Adria Airways d.d. Annual Report 20042
LLetter from the President of the Managing Board
Ladies and Gentlemen!
The year 2004 was an important one for Adria Airways. Slovenia became an EU member, and Adria Airways became a
member of the major global airline alliance, ordered a new aircraft, obtained a new safety standard certificate, exceeded
the projected figures in respect of aircraft maintenance services provided to third parties, and started the construction of
a new hangar. All this was achieved due to a lot of efforts, hard and innovative work from our employees, and through the
cooperation of numerous business partners.
The number of air passengers grew to 885 thousand, which is up by 2 % over the previous year. We closed the year with
positive results.
Adria was well prepared for the accession of Slovenia to European Union. In terms of size, Adria cannot be compared to
other European companies. In terms of the number of passenger seats per employee, however, the company’s ratio is more
favourable than that of the other airline companies in the accession countries. For a number of years, Adria has operated
under the European standards. Adria has obtained the Part 145 certificate, the JAR-OPS certificate, and the SIO 9001:2000
certificate. The aircraft in our fleet comply with all European technical safety and ecological requirements.
Europe is a new opportunity and a new challenge for Adria: there is an extension of the market and an increase in competi-
tion. The increased competition is due to new air carriers, both network air carriers and low-price air carriers that have been
providing air services to the Adria’s domestic airport. We compete with our rivals by repricing our offers and by numerous
other activities. Like other network air carriers, we consider that safety, quality and reliability are those attributes that are
expected of us by the passengers. Our daily thought and commitment to reducing cost is constant and ever stronger.
In respect of costs, Adria was strongly hit by the last year’s increase in fuel prices, which had a strong impact on the final
results, since fuel-related costs amount to 12% of the total costs.
On 15 December 2004, Adria became a regional member of Star Alliance, a global airline alliance. This was a major event
in 2004, and recently in general. By joining Star Alliance, Adria has proved to be a modern and efficient air carrier that
complies with all safety, technical and commercial standards and requirements. The event was sponsored by Lufthansa,
with which we have been cooperating for many years. The preparations had lasted for more than a year. Certain adjust-
Adria Airways d.d. Annual Report 2004 3
ments as well as changes in processes and procedures had been required. In order to realise all this, a lot of additional work
needed to be done by our employees.
By joining Star Alliance, our strategic goal has been reached and our business policy of a network air carrier providing
global services has been established. Now, we can provide to our passengers the best and cost effective connections with
all Star Alliance members that daily provide 15 thousand flights to 795 destinations in 139 countries. The members of the
Miles & More Club, which we have taken over after abolition of our Privilege Club, may choose among destinations in the
entire Star Alliance network when purchasing award miles.
Safety is first and foremost. The quality of Adria Airways in respect of safety was testified by IOSA Certificate that Adria
obtained in August 2004 as one of the first twelve airlines in the world to receive this safety certificate. The IOSA Stand-
ards define corporate organisation, operational procedures, flight security, and corporate security.
In 2004, Adria’s Bombardier authorised service centre for maintenance of aircraft showed good results. The technical
maintenance work was carried out on 77 aircraft type CRJ owned by foreign airlines. Since September 2002, when Canada’s
manufacture Bombardier authorised Adria as its first service centre in Europe, maintenance work has been carried out on
189 aircraft type CRJ. In December 2004, construction of a new hangar was started that should enable a further expansion,
better working conditions, and greater flexibility. In 2004, the share of revenue from aircraft maintenance services provided
to third parties in the total revenue amounted to slightly less than ten percent.
In the middle of summer, a contract for the purchase of a new CRJ 200 (the fifth one owned) was signed. In November
2004, the sixth CRJ 200 (a leased one) was added to our fleet. With an expanded fleet, Adria will be able to additionally
consolidate its position in the European market. Adria will be able to improve its flight schedule, to increase frequencies to
the existing destinations, and to plan new destinations.
The operating conditions in the air traffic become more and more difficult, therefore our activities are focused on cost-cut-
ting measures, competition management, and sales increase. We will continue to focus our attention on passengers and
provision of better services in terms of safety, adequate flight schedule, and travelling quality for an acceptable price.
In the end, I would like to thank all our employees and our partners for their commitment. Without their contribution, the
above mentioned results would not have been obtained. I would also like to thank our passengers for trust in our company.
We will strive to meet your expectations and to strengthen your trust and loyalty also in the future.
Dr. Branko LučovnikPresident of the Managing Board
FLYING
Our planet, which we human beings experience as something static
and absolute, is actually nothing more than an insignificant frag-
ment of the universe that has its own journey, its own laws and its
own duration. This world is also made up of many trillions of liv-
ing creatures, among them some billions of human beings. These
people live and die, love and hate, give and take. They develop
technology for a more comfortable life and for world domination.
How to dominate oneself, one’s family, one’s surroundings, one’s
country or the world: this is the chief motive power behind this lofty
‘development’.
And yet with all our knowledge and technology we cannot change
the mission of our planet. But we can understand it. In order to do
so we need a sideways shift from what we know, a distance from
our own convictions that allows us to have a new, different view
of our ego and its environment. The absolute will become relative
– and this means the beginning of respect for ourselves, our fel-
low human beings, the environment and other living creatures. The
beginning of understanding of transitoriness, finiteness and mean-
ing.
And such knowledge is worth far more than a record, which simply
means the frustration of someone who is seeking his own ego, who
wants to become someone in a way that proves to everyone that he
is better. In our world there is no such thing as better or worse: all
of us together represent a whole which only functions well when all
the parts are in harmony with each other; when we all understand
where our place is and comprehend the nature of our unique role.
To understand the world in its entirety, to understand all living
creatures, all our fellow travellers in this fragment of the universe:
this is my wish and my need. A flight around the world in a small
aircraft that flies so low that the eye can see everything that is hap-
pening down below, yet at the same time fast enough for the brain
to perceive the world as a living, interconnected organism – this is
something that should be experienced by every single inhabitant of
Planet Earth.
For the human being, flying is a contact with a space that loses itself
in the universe. It is a resistance against the gravity that closes us
in our own worlds and fears. Flying brings us together. In a passen-
ger aircraft, all the passengers and crew breathe as one. We are
aware of the flying machine on which we are all equally dependent.
The aircraft is therefore a small world of numerous destinies which
could also be a model for our planet, the Earth.
Matevž LenarčičThe Slovenian aviator who in 2004 circumnavigated the globe in his ultralight aircraft.
Adria Airways helped him to achieve his goal.
Velika planina, Slovenia
Sweden
Habarovsk, Russia
Grand Canyon, USA
Krn, Slovenia
Spain
Adria Airways d.d. Annual Report 2004 17
1st part
Management Report
A
Adria Airways d.d. Annual Report 200418
A
Adria Airways d.d. Annual Report 2004 19
AContents
1 General information 20
2 Key performance data 2004 21
3 Major events 2004 23
4 Report of the President of the Supervisory Board 24
5 Short history of the Company 26
6 Mission, vision, strategy 27
7 Ownership structure 28
8 Fleet 29
9 Performance analysis 30
9.1. Operating conditions in 2004 30
9.2. Notes to achieved physical performance indicators 31
9.3. Revenue structure 32
9.4. Expense structure 33
9.5. Assets structure 34
9.6. Capital and liabilities structure 34
9.7. Plans and operating conditions in 2005 35
9.8. Events occuring after balance sheet date 35
10 Risk management 36
11 Joining Star Alliance, a global airline alliance 38
12 Marketing 39
13 Sales 42
13.1. Passenger transportation services 42
13.1.1 Scheduled traffic 42
13.1.2 Non-scheduled (charter) traffic 42
13.2. Freight transportation services 43
13.3. Aircraft maintenance services provided to third parties 44
13.4. Other services 45
13.5. Partnerships 45
14 Employees – key success factor for the future 46
15 Corporate social responsibility 48
16 Environmental protection 49
17 Safety 50
18 Quality commitment 51
19 Research and development 52
20 Corporate communications 53
21 Who is who, contacts 54
22 Organisational structure of the company 55
23 Representative offices and points of sale 56
Adria Airways d.d. Annual Report 200420
A11. General information
• Address: ADRIA AIRWAYS, Slovenski letalski prevoznik d.d. (shortened: Adria Airways d.d.),
Kuzmičeva 7, 1000 Ljubljana, Slovenia
• Legal form: stock corporation
• Telephone number: +386 1 36 91 000
• Facsimile number: +386 1 43 69 233
• Web address: www.adria-airways.com
• Number of employees: 552
• Year of foundation: 1961
• Company ID number: 5156505
• Tax ID number: SI51049406
• Company register number: 200208417
• Entry number: 061/10135200
• Share capital: 812,436,000 SIT
• Nominal value of a share: 2,000 SIT
Adria Airways d.d. Annual Report 2004 21
A22. Key performance data 2004
Item Unit 2004 2003 2002
Revenue in 000 SIT 32,595,426 29,794,755 28,232,530
EBIT* in 000 SIT 971,899 1,058,955 861,872
Net profit in 000 SIT 42,468 106,688 119,946
Assets in 000 SIT 25,633,650 27,651,999 30,287,571
Equity in 000 SIT 9,918,340 9,873,098 9,769,956
Equity to debt in % 39 36 32
Number of passengers carried 884,861 864,368 814,156
Number of aircraft 9 8 7
*EBIT – earnings before interest and taxes
Increase in volume of operations of Adria Airways d.d.
Efficient performance of basic activity
Adria Airways d.d. Annual Report 200422
A2Decrease in indebtedness, increase in financial power and stability
Trusted by more and more passengers
Adria Airways d.d. Annual Report 2004 23
A33. Major events in 2004
• The fulfilment of conditions for joining the global Star Alliance Group, the start of marketing under its trademark, and
the joining of Star Alliance on 15 December 2004.
• Slovenia’s accession to EU, the opening of the Slovene market for EU transporters, and the entry of Adria Airways on the
unified EU market.
• The signing of a contract with Bombardier for the purchase of a new aircraft, the fifth CRJ-200, and the selection of the
most favourable lender.
• The operating lease of a CRJ-200 aircraft since November 2004.
• The extension of the market share in the sale of services to passengers and aircraft maintenance services provided to third
parties.
• The obtaining of permits, the selection of contractors, the signing of contracts, and the start of construction of a hangar
that is a condition for extension and quality maintenance of the CRJ and the Airbus series of aircraft for third parties.
• The receipt of certification to comply with the IOSA standard, and the maintenance of the ISO 9001.
Adria Airways d.d. Annual Report 200424
A44. Report of the President of the Supervisory Board
In 2004, the Supervisory Board’s special attention was directed to the management of cost items and the competition at its
home airport in Ljubljana.
Through six regular sessions and two conference calls, the Supervisory Board monitored and supervised the performance of
the Company, while paying special attention to:
• lowering the selling cost;
• labour cost management and monitoring;
• efficiency of the individual routes;
• strategic integration of the Company into Star Alliance, a global airline alliance;
• profitability of aircraft maintenance services provided to third parties;
• reduction of other cost subject to the influence of the Managing Board.
Thus the Supervisory Board already in 2003 as well as in 2004 presented to the Company’s management the critical need to
prepare for the increased competition and to address the cost management issue.
In 2004, the Company started responding to the growing competition. However, much remains to be done in all business
areas.
In terms of revenues, the business plan for scheduled traffic for 2004 was fulfilled. As to the non-scheduled traffic and the
aircraft maintenance services provided to third parties, the projected figures were exceeded, whereas the plans were not met
in freight traffic.
In 2004 as well as in 2003, the Supervisory Board addressed and called upon the management at most sessions, not only to
manage safety, sales, and development, but also to consistently manage all costs, in particular those which the management
controls directly.
Due to the high kerosene prices on the world market and even higher prices in Slovenia, fuel cost exceeded the plans by
1,635,688 EUR, despite the modern flee, a successful flight optimisation, and fuel consumption decrease.
Due to the implementation of the new incentive-bonus system as well as due to excessive demands and pressure exerted by
trade unions, the costs of wages and salaries, tax, and contributions were significantly exceeded. Furthermore, the selling
cost and marketing expenses exceeded the planned figures, which was due to the aggressive competition, including low-fare
air carriers.
For the above-mentioned reasons, the generated profit was lower than it had been planned.
The above negative trends in 2004 confirmed the warnings of the Supervisory Board as well as restated the need to develop
a new business model and to implement streamlining measures in all areas.
Supported by the Supervisory Board, the management started the change of the current business model, as it had proved to
be insufficient in the increasingly severe conditions in the market.
Adria Airways d.d. Annual Report 2004 25
A4Furthermore, the Supervisory Board:
• considered the long-term business plan of the Company for the period from 2004 until 2008 and approved the decision
on the purchase of the new CRJ 200 aircraft, delivered in January 2005;
• was informed on the final project referring to the construction of a hangar at Brnik, and on the investment value.
At all regular sessions, the Supervisory Board monitored the Company’s performance based on materials handed-in by the
management in writing.
Particular attention was focused on monitoring all physical and financial operations data, any deviations from the planned
figures, and performance ratios.
At its 74th session on 07 June 2005, the Supervisory Board approved the 2004 Annual Report of Adria Airways d.d. as
submitted, and considered the 2004 consolidated financial statements.
The Supervisory Board also considered the Auditor’s Report, from which it is evident that the financial statements have
been prepared in accordance with International Standards on Auditing, and that they give a true and fair view of the finan-
cial position of the Company as at 31 December 2004, the results of its operations, its cash flows, and the changes in equity
for the year then ended, in accordance with Slovenian Accounting Standards.
The Supervisory Board had no comments on the Auditor’s Report. In accordance with its powers, the Supervisory Board
also discussed the proposal of the Managing Board for the appropriation and distribution of accumulated profit for 2004.
The proposal was approved as submitted.
Peter GrašekPresident of the Supervisory Board
Adria Airways d.d. Annual Report 200426
A55. Short history of the Company
• 1960–1961 Foundation of Adria Aviopromet, a charter airline with DC-6 aircraft. At the end of the sixties, the acquisi-
tion of DC-9 aircraft.
• In the 70-ies Adria becomes one of the most reliable charter air carriers in Europe.
• In the 80-ies Domestic scheduled flights within Yugoslavia; commencement of international scheduled flights. Adria
becomes a member of IATA. Fleet: DC 9, MD 80, Dash 7 aircraft.
• 1989 The acquisition of the first few Airbus A 320.
• 1991 On 25 June, the proclamation of independence by the Republic of Slovenia. For political reasons, Adria remains
grounded for three months.
• 1992 At the end of January, Adria’s operations are re-established in a strongly reduced market. A significant change in the
structure of operations: from primarily a charter air carrier to predominantly a scheduled air carrier.
• 1995 The commencement of cooperation with Lufthansa; inclusion in European integration processes.
• 1996 Financial consolidation of the company.
• 1998 The acquisition of three new aircraft type Canadair Regional Jet 200.
• 2000–2004 Focus on performance of regional scheduled flights, mostly in Europe. Steady addition of new destinations
and frequencies on the existing routes. The intensification of cooperation with the European air carriers, in particular
with Lufthansa.
• 2000 The acquisition of the fourth CRJ 200 aircraft.
• 2002 Adria is authorised by Bombardier as its first European service centre for maintenance of the CRJ aircraft.
• 2004 In December, Adria becomes a regional member of Star Alliance, a global alliance of air carriers.
Adria Airways d.d. Annual Report 2004 27
A66. Mission, vision, strategy
Mission
• Incorporation of knowledge on aviation.
• Provision of top quality services to its clients.
• Based on innovative work undertaken by satisfied employees.
• Return of adequate profit to shareholders.
• Operating in balance with environment.
Vision
Adria Airways endeavours to be a successful European airline with a modern fleet that develops and grows, an airline that
ensures satisfaction of its passengers - and buyers of other services - by providing top quality service and, at the same time,
maintaining its brand recognition.
Strategy
Adria Airways will endeavour to gradually increase the return on equity in accordance with its rules and regulations.
Adria Airways d.d. Annual Report 200428
A77. Ownership structure
• The share capital of Adria Airways d.d. is divided into 406,218 ordinary shares at nominal value of 2,000 tolar.
• As at 31 December 2004, the number of shareholders amounted to 59.
Ownership structure as at 31 December 2004 in %
Adria Airways d.d. Annual Report 2004 29
A88. Fleet
Adria’s fleet is modern, economic and environmentally friendly.
The fleet at 31 December 2004:
Aircraft type Owned Operating lease Total
Canadair Regional Jet 200 LR/ 48 50 seats 4 1 5
Canadair Regional Jet 100 LR/ 50 seats 1 1
Airbus A 320 / 162 seats 3 3
Total 7 2 9
The maintenance of Adria’s fleet is performed by a maintenance organisation that holds an AMO certificate issued under
AA Part-145 in compliance with the EU standards (EASA IR), and in compliance with the Part-145 Certificate.
Adria Airways d.d. Annual Report 200430
A99. Performance analysis
9.1. Operating conditions in 2004
In 2004, the world economy grew at about 5%. The results could have been better, if the growth had not been held by the
record-breaking price of crude oil. If we look at the behind-the-scene macroeconomics in the world economy, we see that
the situation is not rosy and that the promises for 2005 are not very reassuring. According to available data, one half of the
growth of world economy in 2004 was attributable to the economies of USA and China, the two more and more economi-
cally interdependent superpowers.
Also in 2004, the growth of US economy was based on high consumption by the Americans as well as the state, which
resulted in a high deficit in the balance of payments. On the other hand, the growth of Chinese economy was primarily
based on increase in investments and, consequently, integration of more and more country people in modern production
and services. Exports, mostly to USA, are the fuel for Chinese economy. Thus, the magic circle is closed. Such a model of
economic growth results in increasing disproportions in the world economy.
For the present, the problem of the US deficit is still being solved by a drop in the exchange rate of the US dollar against
other currencies, in particular against euro. A disproportionate part of the load of adjusting is to be carried by economies in
the euro area and Japan, which results in a slower economic growth of the euro area, which is even so rather anaemic, and
imperils the recovery of Japanese economy.
Such was the economic environment in which Slovenia operated in 2004. As an EU member country, Slovenia is entirely
subject to the above mentioned economic lines of forces. A special attention shall be paid to the effects of globalisation that
affected Slovenia already in the second half of 2004. However, the full impact will be felt in 2005
In the air transport sector, in particular in the area of the so-called traditional air carriers, structural crisis continued in
2004 (for the fourth year), i.e. the growth of the number of passengers carried was slower than the decrease in average prices
of transport. Low-fare air carriers contributed decisively to such a situation with their policy of extremely low prices. In such
circumstances, the traditional air carriers have no possibility to offload costs on passengers, which results in constant crisis
and in losses. In recent years, most of traditional air carriers drastically cut costs in order to adjust their cost structure to
the circumstance in the market, which could have resulted in an improved business effectiveness of these carriers in 2004.
However, all hopes of improvement were buried in the second half of 2004 due to a quick growth of prices of crude oil and,
consequently, of kerosene.
Although the branch of air transport is in its maturity phase in Slovenia, the accession of Slovenia to EU in 2004 resulted
Adria Airways d.d. Annual Report 2004 31
A9in an increase in foreign air traffic between Slovenia and EU.
With the accession of Slovenia to EU, we have faced increased competition from foreign low-fare carriers at our domestic
airport. The number of foreign charter flights has also increased. A competition to Adria’s system of Ljubljana airport cir-
cle, with flight connections between Western and South-Eastern Europe, will be more intense due to direct flights between
the destinations in these markets.
We respond to this competition by an increased use of CRJ-200 aircraft in scheduled flights, as it is of no use to fly with
A-320 aircraft to destinations where smaller capacity aircraft is clearly required.
9.2. Notes to achieved physical performance indicators
• In 2004, Adria’s fleet consisted of nine aircraft, of which three Airbus A320-200, six Bombardier CRJ (since September
2004), and one CRJ-200 (leased). With the purchase of the sixth CRJ aircraft, our possibilities to optimally allocate
aircraft with regard to the number of passengers have increased. We have also got the opportunity to develop new routes
and to increase frequency on the existing scheduled routes.
• In 2004, Adria operated 18,741 flights and carried 884,861 passengers. In 2004, the number of passengers carried
increased by 2% over 2003. In spite of a world crisis in aviation sector, a growing competition, and a small market, the
number of passengers carried has been increasing since 2001. The number of passengers carried increased by 1% in
scheduled traffic, and by 13% in charter traffic.
• The daily utilisation of aircraft averaged 9.88 hours per aircraft day. This utilisation increased by 6% over the previous
year’s figure due to the fact that the aircraft capacity, measured by the number of aircraft day, increased by 2%, while at
the same time the number of flight hours increased by 8%.
• Labour productivity, measured by the number of passengers carried per employee decreased by 1% over 2003, because the
number of passengers carried increased by 2%, while at the same time the number of employees per hour increased by
3%.
• Average fuel consumption per hour decreased in 2004 by 2% compared to 2003. A decrease in average fuel consumption
per hour is mainly due to an increase in the share of flight hours flown by CRJ-200/100.
• We are considered to be one of the most punctual airlines in Europe. In 2004, average delay per hour was 9.5 minutes
per aircraft on all flights. If we compare Adria’s share of flights delayed more than 15 minutes on scheduled routes with
the average delay per hour of 30 European airlines in AEA (Association of European Airlines), we find that the share
achieved by Adria is lower.
Comparison with AEA – scheduled flights
Adria Airways d.d. Annual Report 200432
A9Variance between key categories of profit or loss in 2004 and 2003
Variance to 2003 in thousand SIT Comparison to 2003 (index)
Net sales revenue + 3,270,392 112
Gross profit from sales + 479,910 109
Net profit or loss from ordinary activities + 63,797 160
Net profit or loss - 64,220 40
9.3. Revenue structure
• Net sales revenue generated in 2004 increased by 12 % compared to the previous year, and exceeded the projected figure
by 6%. The exceeding of annual sales goals was due to increased volume of charter flights and increased volume of air-
craft maintenance services provided to third parties.
• Revenue from scheduled passenger traffic accounts for the major portion of net sales revenue.
• Revenue from scheduled traffic increased by 7%, sales revenue from chartered passenger traffic by 24%, and sales rev-
enue from aircraft maintenance services provided to third parties by 104%.
• Revenue from scheduled passenger traffic increased to a larger extent than the number of passengers carried, because the
average coupon value also increased. Quality growth was also achieved by differentiation of our services – stimulation of
travel in the business class section, assurance of quality cabin services – and by promoting Internet sale. In addition, we
tried to attract more passengers with lower fares, simplified tariffs, and an increased number of frequencies to the exist-
ing destinations.
• Revenue from non-scheduled (charter) traffic increased in spite of severe competition; the number of economically inter-
esting »ad-hoc« flights increased and charter flights within EU were continued.
• Revenue from cargo traffic decreased by 18% owing to decreased demand for air freight transport, which is due to com-
petitive low-cost road transport, and to changes in import restrictions. More and more, air freight transport is faced with
shortage of air cargo capacities, because larger aircraft is increasingly engaged in charter flights.
• In 2004, revenue from aircraft maintenance services provided to third parties showed the major increase compared to
2003. The demand for technical maintenance of CRJ aircraft continues, which is due to that fact that our services satisfy
Adria Airways d.d. Annual Report 2004 33
A9our clients’ needs, both in terms of quality and in terms of deadline. The decision to direct our activities in sale of techni-
cal services provided to third parties has proved to be the right one. Not only does this segment complement the core
activity, it also raises the level of technical knowledge of our employees.
• A major variance under finance revenue is recorded under revenue from exchange gains, which show a decrease by 36%
compared to 2003 due to minor currency fluctuations.
9.4. Expense structure
• Production cost, selling cost, and general administrative cost increased by 12% compared to 2003.
• Cost of materials increased by 31% compared to 2003, mainly due to high prices of jet fuel.
• The fuel cost index is 134. The increase was due to increase in volume of air traffic and, consequently, to increase in
fuel consumption and in particular to record high prices of crude oil in the world markets. In 2004, the average price
of kerosene expressed in US dollar (the basis for pricing) increased by 31% compared to 2003. This was to some extent
counterbalanced by a 7% fall of US dollar.
• Cost of spare parts for aircraft maintenance increased by 122% over the previous year’s figure, which is due to increased
volume of maintenance of both own aircraft and customer aircraft.
• In 2004, airport charges increased by 5% compared to 2003, which is not much taking into consideration the increased
number of flights (by 6%) and the higher exchange rate for euro, to which most of airport charges are linked. Costs were
well managed by selection of competitive offers from the airports, by alteration of contract prices and other provisions.
• Navigation charges index was 107 compared to 2003. Navigation charges continue to increase in line with the increased
volume of flights.
• Aircraft maintenance cost increased by 7% compared to 2003, mainly due to an increase in the volume of maintenance
services provided to third parties and the volume of maintenance of own fleet. Due to an increase in the number of own
aircraft, a higher utilisation of aircraft, and a one-year older fleet, more check-ups of aircraft as well as more major repairs
of aircraft systems and aircraft motors are required.
• Cost of lease increased by 39% compared to 2003, which is due to a lease of an additional CRJ aircraft since September
2004.
• Fleet insurance cost decreased (index 78) due to a new insurance contract concluded on 1 March 2004, in which the
conditions are more favourable than in the previous one, as well as due to a drop in US dollar, which is the currency of
insurance contracts.
• Depreciation expense decreased by 10% compared to 2003, because no major tangible assets were capitalised in 2004.
Depreciation expense is still rather high, because aviation industry is an investment intensive industry, which results in
high depreciation expense.
• Selling cost increased by 10% compared to 2003. Selling cost comprises cost of own sales network operating in Slovenia
and abroad, agent commission, cost of booking system, and labour cost attributable to the marketing and sales depart-
ment.
• General administrative cost (index 117 compared to 2003) comprises cost of the management, finance and accounting
department, HR and legal department, general support department, corporate communications, safety and security, and
quality commitment. General administrative cost increased due to strengthening of certain departments; more attention
was paid to staff potential and other important supporting processes.
• Interest expense decreased by 16% due to regular repayment of long-term borrowings and to non-raising of new short-
term or long-term loans.
• Exchange losses were down by 31% compared to 2003, mainly due to lower volatility of exchange rates than in 2003.
Adria Airways d.d. Annual Report 200434
A99.5. Assets structure
• As at 31 December 2004, the balance sheet total decreased by 7% over the previous year-end figure.
• Total assets include fixed assets (79%), receivables (13%), and inventories (3%).
• Fixed assets comprise for the most part tangible fixed assets, of which aircraft represent the major portion (86%).
• The carrying amount of aircraft decreased by 11% in 2004 due to depreciation and a drop in US dollar, in which subsidi-
ary records are kept (refer to accounting policies on revaluation of aircraft).
• Operating receivables increased by 13% compared to 2003, which is due to an increase in volume of sales, in particu-
lar those stated in foreign flight documents where receivables are tied up for a period of 45 days (Clearing House). All
receivables are stated in real terms and are collectable.
9.6. Capital and liabilities structure
• In the capital and liabilities structure, the share of capital increased compared to 2003, mainly due to a decrease in long-
term liabilities. The 39% share of capital in the capital and liabilities structure gives better stability and financial strength
to the company. The reason for a decrease in long-term liabilities in the capital and liabilities structure is a regular repay-
ment of long-term borrowings and a drop in the exchange rate for US dollar.
• Long-term financial and operating liabilities decreased by 17% compared to 2003. Long-term liabilities comprise, almost
in their total amount, financial liabilities, of which liabilities to domestic banks amount to 28%, liabilities to foreign
banks to 15%, and liabilities to other foreign financial institutions to 56%.
Adria Airways d.d. Annual Report 2004 35
A9• Short-term financial and operating liabilities decreased by 1% compared to 2003. The company met all its liabilities in
due time.
9.7. Plans and operating conditions in 2005
Adria Airways d.d. entered the year 2005 as a full member of the Star Alliance group. The company intends to utilise syn-
ergy effects of the access to Star Alliance to defy sharp competition in the extended European market.
• In January 2005, the company purchased a new CRJ-200LR aircraft and increased its fleet to 10 aircraft.
• The completion of the construction of hangar is planned in the first half of 2005. The new hangar will ensure better
conditions for provision of maintenance services and for extension of the offer for Airbus maintenance for third parties.
• We plan an increase in the volume of flights by 11%, an increase in the number of passengers carried by 12%, and an
increase in total revenue by 5%.
• A special attention will be paid to cost management.
• We intend to set a more durable concept of advertising and to enhance marketing penetration into foreign markets.
• A new scheduled route will be planned in accordance with the fleet availability and the agreement with partner air carri-
ers.
• An important plan target is the promotion of Internet sales. We expect an increase in web site visit frequency and the
simplification of tariff structure.
• By providing quality services, we wish to maintain and to increase passenger loyalty, to maintain competitiveness in the
market, and to increase recognition of Adria as a cost-efficient, punctual and quality airline.
• Because of a relative lagging behind of IT infrastructure in previous years, more respective investments are planned in
2005, in particular into the basic infrastructure equipment.
• We plan to introduce new programme packages and to complete the introduction of programme packages activated in
2004 on the company level. Financial analytical functionality and functionality in respect of security policy shall be
provided.
• The upgrading of IT infrastructure will ensure data security in accordance with BS7799. The additional automation of
operations will provide for higher productivity.
• The adverse trends in fuel prices will be managed by extra mark-up on selling prices, by flying smaller aircraft, and by
economy of flying.
9.8. Events occurring after balance sheet date
• At the end of January 2005, Adria Airways d.d. purchased a new CRJ-200LR aircraft with 50 seats; the company started
to operate the aircraft in the beginning of February 2005. The purchase of a new aircraft was approved by the supervisory
board of the company in its meeting on 12 July 2004. Additional CRJ aircraft enabled the company to optimise flights,
to include smaller aircraft where larger aircraft is not required, to fly more economically, and to increase frequencies on
important routes.
• To finance the purchase of the aircraft, a long-term foreign currency (US dollar) loan was raised from a domestic bank for
a period of 20 years and at variable interest rate. The loan was utilised at the end of January 2005.
• In December 2004, the construction of a new modern hangar was started. The hangar will provide optimum conditions
for maintenance of our own fleet and for extension of aircraft maintenance services provided to third parties to mainte-
nance of larger aircraft, such as Airbus. The hangar will be ready for use in six month.
Adria Airways d.d. Annual Report 200436
A1010. Risk management
Due to its international orientation, Adria Airways d.d. is exposed to certain types of financial risk. In the process of risk
management, Adria tried to identify them and to manage them in order to achieve:
• a stability of operations and a decrease in risk exposure,
• an increase in the company value and in the impact on credit standing of the company,
• an increase in financial revenue and/or a decrease in financial expenses, and
• a nullification or a reduction of the effects of extremely unfavourable events.
Adria’s financial risks comprise currency risk, credit risk, interest rate risk, liquidity risk, risk associated with insurance of
interests and property, and risk associated with changes in fuel prices.
Currency risk
• In 2004, the development of world events, the economic recession in some developed countries, the Iraqi war, and the
fuel prices resulted in major currency movements in international money markets. Most of foreign currency inflows and
outflows of the company are expressed in USD and EUR. In accordance with the exchange rate policy of the Bank of
Slovenia and because of the expected entry of Slovenia in the exchange rate mechanism (ERM-2), the exchange rate of
EUR to SIT increased moderately and evenly in 2004, and achieved a 2% annual growth rate. In 2004, the movement of
the exchange rate of USD to SIT was negative and showed an annual decrease by 7%.
• The underlying currencies of the transactions with foreign countries are euro and US dollar, partly also English pound
and Swiss frank. The major net exposure is in US dollar (short position) and in Swiss frank (long position). The inflows
and outflows expressed in other currencies have been balanced by means of other internal mechanisms, and thus the
company’s risk exposure has been nullified.
• Adria succeeded in reducing its risk exposure by implementation of the following measures:
- The choice of currency in international economic transactions;
- The promotion or the curb of outflows or inflows in a certain currency;
- The price adjustment (price increase in the USD area due to a drop in exchange rate);
- The increase or decrease in the volume of indebtedness in a foreign currency (long-term borrowings in euro for the
fourth aircraft);
- The offset and clearing (monthly offset - Clearing House);
- The hedge by a foreign currency clause (sale of charter flights –with a euro clause, tariffs in Slovenia linked to euro).
• Due to continuing drops in the exchange rate of USD to SlT, external methods, i.e. derivative financial instruments, are
not used to hedge against risk.
Credit risk
• Credit risk is the risk that domestic and foreign customers will fail to discharge their obligations. The credit risk is man-
aged successfully by:
- dispersion of customers;
- analysis of financial operations of the customer and risk assessment prior to conclusion of a debt deferral agreement;
- through IATA (International Air Transport Association), of which all our partner airlines are members; most of our
partner travel agencies are an IATA approved agent; IATA members are subject to control: if they fail to meet payment
terms, they are punished;
- additional collateralisation of risky debts by bank guarantees, bills of exchange;
Adria Airways d.d. Annual Report 2004 37
A10 - systematic active process of debt collection.
Interest rate risk
• Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
• The company is only partially exposed to interest rate fluctuations on its borrowings, since most of its borrowings have
been raised at fixed interest rate. A portion of long-term liabilities at variable interest rate may be changed to liabilities at
fixed interest rate. All loan liabilities may be repaid early.
• As at 31 December 2004, 71% of all financial liabilities (arising from long-term foreign currency borrowings for aircraft)
are agreed at fixed interest rate. We estimate that the company’s exposure to interest rate risk is small.
Liquidity risk
• Liquidity risk is the risk that the company will encounter difficulty in raising funds to meet current commitments. It is
managed by adjustment of due dates of receivables and by cash flow monitoring. The company prepares daily, weekly and
monthly liquidity plans. The company meets its obligations in due time, therefore it has no liquidity problems.
Insurance of interests and property
• The scope and intensity of insurance cover changes in dependence from the growth of property, the use of new technolo-
gies, and the markets. At the same time, the company’s exposure to risk changes.
• The scope of insurance cover determines the risk against which the insured is covered. The intensity of insurance deter-
mines the scope of compensation of damages.
• The precautions taken by the company to prevent damage and risk exposure:
- Installation of additional aircraft equipment – anti-intrusion doors - to increase safety of passengers, crew, and property;
- Installation of enhanced ground proximity warning systems (EGPWS) in aircraft;
- Purchase of work platforms and stairs for a safer work environment and for prevention of damage to aircraft;
- Twice-a-year refreshment training on flight simulators for the cockpit crew;
- Permanent training for employees on fire safety and safety at work.
- Connection of fire-fighting systems with Ljubljana Airport and security services;
- Regular medical checks for employees.
• The company insures aircraft, spare parts, goods in transit, all liabilities pertaining to passengers, and third-party claims
for damage in accordance with international regulations and conventions (Montreal Convention).
• The company performs its activity on the basis of the above insurances.
Risk associated with changes in fuel prices
The company manages the risk by:
• choosing the most competitive aviation fuel suppliers in the international airports and by requiring price transparency
from domestic aviation fuel suppliers;
• planning the aircraft type with regard to the number of passengers;
• mark-up on own selling price for increased fuel cost;
• monitoring of the market of derivative financial instruments to hedge fuel prices.
Adria Airways d.d. Annual Report 200438
A1111. Joining Star Alliance, a global airline alliance
The most important event for Adria Airways in 2004 was its entry in Star Alliance.
The strongest strategic global airline alliance, Star Alliance, decided to expand its alliance also by smaller and reliable
airlines. Adria was invited to join the alliance as a regional member. Each regional member must be sponsored by an exist-
ing member. The sponsoring airline of Adria is Lufthansa as a result of our long standing cooperation and joint flights on
certain routes. By meeting the requirements, Adria has proved to be a modern and efficient air carrier that complies with all
safety, technical and commercial standards.
By joining Star Alliance, our strategic goal has been reached and our business policy of a network air carrier providing
global services has been established.
Now, Adria can offer its passengers all advantages arising from the expanded access to the Star Alliance’s global network.
In addition, all benefits offered by the members of Star Alliance are available to Adria’s passengers: a single check-in to the
final destination, lounge access, the possibility of earning and redeeming frequent flyers miles or points on any member
airline.
When joining the alliance, we decided to join Lufthansa’s Miles&More frequent flyer programme. In terms of customer
benefits, Adria can offer now its passengers the possibility of earning and redeeming frequent flyers miles on any Star Al-
liance member airline. Lufthansa’s Miles&More frequent flyer programme is the most numerous and the leading bonus
system for air passengers in Europe. It is based on earning miles on the entire Star Alliance network, inclusive of its partner
airlines. It is also possible to earn miles on the basis of the use of other services, such as hotel accommodation, rent-a-car,
credit cards, etc.
Star Alliance is a global airline alliance that was founded in 1997 by five airlines: Air Canada, Lufthansa, Scandinavian
Airlines, THAI, and United. Since 1997, the alliance has expanded its network with the inclusion of the world’s finest air-
lines. Today, more than 342,000 employees provide services to 384 million passengers in a year. The Star Alliance member
carriers operate daily more than 15,000 flights; they serve 795 airports in 139 countries with a fleet of 2,800 aircraft. And
as curiosity – Star Alliance’s aircraft take off and land every three seconds.
The members of Star Alliance are: Air Canada, Air New Zealand, ANA, Asiana Airlines, Austrian, bmi, LOT Polish
Airlines, Lufthansa, SAS, Singapore Airlines, Spanair, TAP Portugal, THAI, United, US Airways, and VARIG; next year,
South African Airways will join the alliance.
Adria Airways d.d. Annual Report 2004 39
A1212. Marketing
In accordance with its mission, vision and objectives, Adria Airways declares itself as a regional air carrier that provides air
transport services from Slovenia to all European countries and offers good connections between Western and South-East-
ern Europe.
The basic objective in 2004 was to consolidate the position of Adria Airways as a regional European air carrier that is
distinguished for its individual approach, responsiveness and flexibility, and for its personnel’s attentive approach to its pas-
sengers needs. Adria’s competitive advantage is built on top quality services, excellent flights network, and active communi-
cation with passengers. We strive to meet the needs and the wishes of our passengers and, in this way, to consolidate their
fidelity and loyalty.
An important objective is to maintain relations with key partners and to define or identify new strategic partners.
The marketing activities are based on the analysis of domestic and foreign markets, guidelines in respect of tourist and busi-
ness supply and demand, and the analysis of economic, political and cultural movements.
Key activities in 2004
The planning and implementation of market strategy in 2004 was marked by the state and movement of economy in
Europe, and by major movements in aviation industry, in particular by the rise of low-fare air carriers and the development
and use of e-media. The projected increase in air traffic due to accession of Slovenia to EU, the expected increase in foreign
air carriers operating from the domestic airport, the prognosis of basic trends in tourism, such as an increase in continental
travels, higher mobility of individuals, stronger seasonal oscillations, an increase in on-line booking, and use of IT in tour-
ism, dictated a more courageous approach to setting our goals in 2004. The following goals are to be set out:
• Redesigning of websites, with the emphasis on an increase in web purchasing;
• Maintenance and increase of loyalty of passengers, and an increase in market share;
• Investments in market research in order to define in more detail the key market segments, and to identify the potential
new ones.
• Maintenance and modernisation of communications with loyal passengers.
• Increase in revenue by own media marketing campaign.
• Increase in recognition of Adria by key passenger segments in the market;
• Upgrading of on-board services (meals, magazines, personnel’s approach).
Market communications in Slovenia and abroad
In 2004, the market communications activities were directed toward creation of increased corporate reputation of Adria on
the basis of its competitive advantages, such as an extensive network of flights, top quality services, and a care for passen-
gers. Accordingly, we communicated to our passengers that with Adria the world was smaller, more accessible, and within
easy reach, both in terms of speed and price. We presented to them a widely branched network of flights operated by the
Slovene air carrier, who, together with its partners Lufthansa and Austrian Airlines, provides excellent connections from
Ljubljana to all parts of the world. With the slogan “Everybody has a dream”, a link was established between the services
provided by Adria and the “dreams” that these services may make a reality (destinations, travels, experience).
Adria Airways d.d. Annual Report 200440
A12Compared to the previous year, marketing communications, i.e. advertising and creative communications, were partly
redesigned in 2004 in favour of e-media, with the emphasis on the development of websites and the introduction of web
purchases.
In the last third of the year, the communications were unified under the slogan »Jump to Internet, visit the world« in order
to conform them to the management of web brand, in which web purchases are emphasized.
Most of the presentation activities and other marketing communications activities in foreign markets are performed by
Adria’s representative offices that are in charge of individual foreign markets. By good knowledge of market characteristics
and competition monitoring, they ensure the presence of Adria in all our foreign markets. Their notable tasks include main-
tenance of regular contacts with the foreign agents network, information of agents through various channels, and organisa-
tion of study travels for agents and journalists. The brand recognition was increased and the brand image strengthened by
various presentation activities organised by us alone, or in cooperation with our key partners and strategic partners. Besides
tourist agencies, Slovene Tourist Organisation (STO) is one of our key partners. In 2004, Slovene Tourist Organisation
organised several fair presentations and stock exchange presentations; Adria Airways participated in ten of them.
In the area of advertising and public relations, a joint action in 2004, together with its partners, proved to be very effective.
It was designed to promote concrete offers and actions, and less to promote corporate advertising. In addition to advertis-
ing, in particular in press and travel catalogues, we participate in foreign markets as sponsors of various cultural, economic,
and sports events.
Websites
Adria has followed development of web sale. Since March 2004, web sale is provided on its redesigned websites. Great stress
is laid on the safety of web purchases.
A special attention is paid to the features that encourage the visits of website: web purchase, direct marketing by issue of
web news, an increase in database by organisation of prize games, booking of hotel rooms and rent-a-car, with a special
emphasis on cost-efficient offers.
Marketing research
Our passenger contact centre carried out five marketing researches in 2004: measurement of satisfaction of passengers with
Adria’s services (the first half and the last half of 2004), determination of satisfaction and needs of passengers in relation to
newspapers and magazines available onboard of Adria’s aircraft, and determination of satisfaction and needs of passengers
in relation to cabin crew and changed meals in economy class. On the basis of research findings, adequate measures have
been taken to improve services.
On an average, our services were rated at a high level, slightly higher than in 2003. This tells us to continue to cultivate
brand recognition by providing high quality services.
Adria Airways d.d. Annual Report 2004 41
A12Passenger contact centre and Privilege Club
After joining Star Alliance and gradual winding-up of Adria’s frequent flyer programme, Privilege Club, all members of
Privilege Club were offered a possibility to join Miles&More programme (bonus programme where bonus points or miles
are earned). In 2004, the ACC – Adria Corporate Card project was continued. This loyalty card is designed for enterprises
and public institutions in Slovenia (earning of points on the basis of flights). The benefits provided by this programme (col-
lection of points earned on business flights made by several passengers on a single account) met with positive response from
Slovene enterprises.
The passenger contact centre operates in compliance with the CRM principle. The centre that is designed for direct com-
munication with passengers has been providing its services for four years. In 2004, the emphasis was on the provision of
services to all Adria’s passengers, in particular in case of claims. To help passengers get simpler and quicker access to infor-
mation, a free telephone line was provided.
Marketing of Adria Airways’ media
Adria Airways’ In-Flight Magazine, Privilege News, and Timetable are important media of communication with our pas-
sengers. At the same time, these media become more and more interesting for advertisers who want to advertise in domestic
and foreign media. In addition to the existing printed media, more ambient media are provided on board of our aircraft.
They have also been successfully marketed.
One of the basic goals taken into consideration in the contents of our media is the provision of better quality services. Some
of our successful marketing actions were focused on our junior passengers. At the same time, we contributed to recognition
of Slovene brands.
Adria Airways d.d. Annual Report 200442
A1313. Sales
The principal activities of Adria Airways:
• Passenger transportation – scheduled traffic
• Passenger transportation – non-scheduled (charter) traffic
• Freight transportation
• Aircraft maintenance services provided to third parties
• Other activities
Structure of net sales revenue in 2004
13.1. Passenger transportation
13.1.1 Scheduled traffic
Scheduled passenger transportation is our principal business activity. In 2004, 79% of net sales revenue was earned from
sale of scheduled passenger transportation services.
Defining of market segments
With regard to the geographical position, the markets of Adria Airways may be roughly divided into:
• Slovenia’s market with border regions – transportation of passengers from Slovenia to destinations in West and Southeast
Europe;
• Markets in West Europe – transportation of passengers from destinations in Western Europe to Slovenia and via Slovenia
to destinations in Southeast Europe; transportation of passengers between EU countries;
• Markets in South East Europe – transportation of passengers from destinations in South East Europe to Slovenia and via
Slovenia to destinations in West Europe;
• »Off-line« markets – agents in these markets contribute a negligible share to the total amount of Adria’s passengers.
13.1.2 Non-scheduled (charter) traffic
Charter operations are designed to optimise yield and not primarily to increase volume. In the national market, Adria is by
Adria Airways d.d. Annual Report 2004 43
A13far the most important charter air carrier, with its market share exceeding 80%. The key destinations are subject to techni-
cal characteristics of Adria’s fleet, and products provided by its major customers, i.e. Slovene tour operators.
In 2004, the situation in the charter traffic market changed significantly. Upon the accession of Slovenia to EU, an upward
trend was observed in the tourist services and products market in Slovenia. On the other hand, however, the Slovene carri-
ers as well as tour operators were under strong competitive pressure due to opening of the Slovene market to EU carriers.
In 2004, the growth of the market was rather high, both in terms of physical volume and in terms of financial volume. In
the view of intense competition, the decision of Adria Airways, in respect of charter flights, to primarily optimise opera-
tions, instead of to increase the volume, proved to be correct.
In 2004, Adria succeeded to maintain its key customers by adequate quality and price of its services. We estimate to have
consolidated our position in the charter airline segment also by a recognisable brand.
Adria Airways’ network of scheduled and charter flights
13.2. Freight transportation
In 2004, Adria transported 3,530 tons of freight, of which 30% of mail.
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Adria Airways d.d. Annual Report 200444
A13The availability and utilisation of free freight capacities are subject to distance, aircraft type, number of passengers, and
luggage. Scheduled flights are mainly operated by smaller aircraft of the type CRJ 200, where freight facilities are offered for
smaller urgent consignments and airmail. Larger consignments are transported by the larger A-320 aircraft. At times and
if required, regular ground (truck) transportation services are provided between the airports. As the trend shows, both in
Europe and in Slovenia, the share of truck transportation services tend to increase in the future.
In Slovenia, we have our own sales office and cooperate with freight forwarders that have directed their activities in air
transportation of consignments. Our esteemed and important business partners are Slovene enterprises and Slovenian Post
Office.
In the countries abroad, the selling is carried out through sales agents who represent Adria in the countries, from which we
fly to Slovenia and via Slovenia to destinations in Balkan. Our most important freight sales agents are in Germany, France,
Great Britain, Belgium, the Netherlands, and Turkey. In recent years, our sales have been extended to USA. This year we
are entering the Far East markets.
The contracts concluded with renowned world airlines enable us to enter distant markets, where air freight transportation
from and to Slovenia is in demand.
For additional information about us and our activities, please, refer to the website www.adria-airways.com. In 2005, daily
updated information on consignments transported by Adria will be available on the website.
13.3. Aircraft maintenance services provided to third parties
Adria Airways is distinguished for its top technical knowledge, which is based on more than 40-years experience in mainte-
nance of McDonnel Douglas, Airbus, and Bombardier aircraft.
In July 2002, Adria Airways became the first and the only Bombardier authorised service centre in Europe for modification
and servicing of the Bombardier CRJ aircraft, Series 200 and 700. Adria provides its services to all airlines with Canadair
Regional Jet aircraft in their fleet.
On the basis of experience and quality work provided to foreign customers, Adria signed in July 2003 a long-term contract
with Bombardier for maintenance (four years) and/or servicing of the Bombardier CRJ aircraft.
The number of aircraft maintained by Adria under the authorisation of Bombardier:
Adria Airways d.d. Annual Report 2004 45
A13High professional knowledge, previous experience, and satisfaction of corporate partners with fulfilment of contractual
obligations give an assurance that in the future Adria will be able to extend its aircraft maintenance services to Airbus
operators.
In the beginning of 2005, maintenance of Airbus 321 aircraft was provided for two foreign business partners.
In December 2004, the construction of a new hangar was started. In the hangar, there will be room for three CRJ aircraft
and one Airbus aircraft. The construction of the hangar will be completed by summer 2005. Thus, extension of business
activity, better working conditions, and higher flexibility will be enabled.
13.4. Other activities
In addition to scheduled flights, personalised services are provided to our passengers, such as:
• sightseeing flights in Slovenia – aerial view of Slovene towns and regions,
• individual passenger transportation services by a three-seat Piper Turbo Arrow PA-28R-201T aircraft to major towns with
a recreational flying airfield in Slovenia, or to the nearby airports in the neighbouring countries.
13.5. Partnerships
Adria Airways has concluded code sharing agreements with Lufthansa, Austrian Airlines, Aeroflot, Croatia Airlines,
Montenegro Airlines, Aeroflot, and LOT Polish Airlines, thus ensuring its passengers access to the global networks of these
airlines.
Adria Airways has established commercial cooperation with more than 100 foreign airlines. The arrangement makes it
possible for its passengers to travel all over the world with a ticket issued by Adria Airways. Since December 2004, Adria has
been a regional member of Star Alliance, the global airline alliance.
Membership in international aviation organisations
IATA – International Air Transport Association - since 1984
AEA – Association of European Airlines
MITA – Multilateral Interline Traffic Agreements (pax) – since 1984
MITA – Multilateral Interline Traffic Agreements (cargo) – since 1985
As the national air carrier, Adria Airways participates in forums organised by international organisations, in which the
Republic of Slovenia is a member:
ICAO - International Civil Aviation Organization
ECAC - European Civil Aviation Conference
ECAA – European Common Aviation Area
JAA – Joint Aviation Authorities
Adria Airways d.d. Annual Report 200446
A1414. Employees – key success factor for future
At the year-end 2004, the company employed 552 staff, an increase by 2% compared to the year-end 2003. The average age
of employees was 42.6 years.
An increase in the physical volume of flight operations and maintenance services resulted in additional employments in the
flight operations sector (co-pilots) and the aircraft maintenance sector. There were no additional employments in other sec-
tors. Due to changes in organisational structure, internal reallocation of staff was carried out.
In 2004, modernisation of the payroll system was completed. It comprised three major phases: modernisation of organisa-
tion structure, job classification, and payroll system.
Simultaneously with the introduction of Quality Commitment System, the number of levels of management was decreased,
which resulted in better conditions for dynamic operation of the management and a better information flow. Team work
and project work were strengthened. Job classification was updated and new employment agreements were concluded with
the employees. The updating of job classification contributed to streamlining of job division and to establishment of condi-
tions for introduction of target management. An important aspect of the new job division was the company’s decision that
the employees are to acquire the level of education required in the particular job that they occupy.
The project was completed by introduction of a new payroll system. It was an important move after two unsuccessful at-
tempts in the past eight years.
The new payroll system introduced a progressive incentive bonus scheme for aircraft technical personnel, comparable to
other European airlines. A flexible remuneration scheme was introduced for supporting jobs, both for individuals and
groups. Thus, most successful individuals and teams will be able to earn higher incentive bonus.
We continued to conduct annual discussions with employees to the level of professional employees on the basis of the
interactive computer support. The up-to-date computer support has been developed by a profession team in the company.
In addition to the process of training and HR management, the process of management on all levels in the company is sup-
ported.
An extensive training designed for the heads of all departments was carried out in order to improve their management,
communications, motivation, negotiation, and financial skills. The competitive image of the heads was developed. On
the basis of the competitive image, the satisfaction of superior officers, subordinates, and heads among themselves will be
measured.
As a company committed to provision of quality services to our passengers and partners, we take care of training and per-
manent development of our key staff groups coming daily in contact with customers. In 2004, a six-days training in the field
of communications, marketing and personal development was organised for them.
The company encourages its employees to continue their studies and obtain new knowledge required in an increasingly
competitive environment. In 2004, a total of 55 co-financing contracts for work study, or annexes to co-financing contracts
for work study, were concluded with the employees. Most of the employees (97%) study to obtain higher, high, or university
level of education. Therefore we expect that the share of highly professional staff will increase by 10% in the next three to
five years.
Adria Airways d.d. Annual Report 2004 47
A14Average number of employees per level of education: :
Level of education I. II. III. IV. V. VI. VII. VIII. IX. Total
Total 4 10 4 48 234 133 117 1 1 552
Within the psychosocial support provided to employees, the following programmes were offered: pre-retirement pro-
gramme, anti-stress workshops, personal support to employees, motivation & health programme directed at decrease in sick
leaves by 3% in 2005.
The company continues to co-finances additional voluntary pension schemes, to provide assistance to employees with health
problems resulting in longer sick leaves, and to provide free preventive medical examinations and personal accident insur-
ance.
Adria Airways d.d. Annual Report 200448
A1515. Corporate social responsibility
Adria is aware of its broader social responsibility and the value of mutual cooperation with the environment. We take care
of our relationship with the environment and consolidate it by donations and sponsorship. We cooperate with and sup-
port various groups, institutions, and individuals. With them we share common values and thus maintain a responsible
approach to broader social issues, help achieve a more sustainable development on local and national level, and, last but not
least, bring our services close to those, who do not have an easy access to them.
• We support the UNICEF Change for Good programme, which helps children in developing countries;
• We provide humanitarian assistance to socially endangered children and families;
• In 2004, we donated funds to Onkološki inštitut Ljubljana (Oncological Institute Ljubljana), Karitas, RK Slovenija (Red
Cross Slovenia), Ustanova za otroško nevrologijo (Pediatric Neurology Ljubljana), Društvo za ledvične bolnike (Kidney
Patient Association), and Mednarodno združenje žensk SILA (Slovenian International Ladies Association).
• We cooperate with Slovene Olympic Committee and financially support Slovene sportsmen;
• For many years, we have been sponsoring numerous Slovene cultural and health institutions and projects, such as Festival
Ljubljana, Festival Lent, Mednarodni grafični bienale (International Graphics Biennale), Imago Slovenije, Zavod za
ekologijo (Institute for Ecology), Zdravniška zbornica Slovenije (Slovenian Medical Chamber), student’s organisation,....
• In 2004, Adria as the official air carrier helped realise 25 international congresses on medicine, culture, law, business,
e-media, and marketing.
Adria Airways d.d. Annual Report 2004 49
A1616. Environmental protection
Adria Airways is an ecologically aware company.
Adria Airways actively works towards reducing fuel consumption, gas emissions, and noise pollution. The aircraft in our
fleet operate in accordance with the ecological and other requirements set by ICAO (International Civil Aviation Organiza-
tion). Both types of aircraft engines installed in Adria’s aircraft reach only 70% of emission limits set by ICAO for gas and
smoke emissions.
Aircraft maintenance is in many ways similar to industrial production, where waste water is produced. The ecological waste
water treatment is carried out by a waste water treatment plant. In the plant, waste water is treated to such a degree that it
may enter into the common biological purification plant operated by the airport. Then the water that is purified to high
level is discharged into the underground stream.
Paper is separated from other waste and sent to recycling mills.
Adria Airways d.d. Annual Report 200450
A1717. Safety
In the previous period, a lot has been done by Adria Airways in terms of safety and security.
In 2004, the IOSA certificate was awarded to Adria Airways by IATA – International Air Transport Association. This cer-
tificate attests that Adria Airways operates in compliance with the highest civil aviation standards. Many of these standards
define the organisation, procedures and equipment required to promote the safety and security of an airline. To ensure com-
pliance with recommendations made by the auditors, our organisation and procedures had to be adjusted prior to obtaining
the certificate.
Flight safety
The installation of EPGWS – Enhanced Ground Proximity Warning System in all Adria’s aircraft was a major acquisition
for the company. The system anticipates terrain hazards well before they become a threat. The advantage of this system
against its older versions is that the navigation system warns, on the basis of self-contained terrain database, the flight crew
of potential terrain hazard before within the reach of radio altimeter. The basis of such a system is an accurate navigation
system based on GPS technology, which is still to be installed in the A320 aircraft.
The next acquisition is the automatic ELT – Emergency Locator Transmitter, a radio transmitter enabling immediate identi-
fication of the aircraft’s crash site. Up to now, manually activated transmitters had been installed in the A320 aircraft.
Adria Airways also has a professionally qualified »safety team«. The safety team is in charge of monitoring of the safety level
in the company, cooperates professionally with other airlines, and manages the Safety Data Collection System. The safety
team also manages the Flight Data Monitoring System, which, like aircraft black box, is designed to record data on each
flight. By filtering of data and analysing of trends, the system helps Adria to monitor the flight safety and to improve it
continually by implementation of certain procedures.
Security
In the previous period, Adria Airways adjusted to a changed situation in civil aviation security. The major acquisition was
the installation of a reinforced cabin door in all Airbus 320 aircraft and in some Canadair Regional Jet aircraft. The proce-
dure of locking up of the cabin door was introduced. By this acquisition, Adria is equipped to fly also to countries question-
able in terms of safety, such as Israel. The Security and Facilitation Unit within Adria Airways is in charge of supervising
and monitoring the security of the airlines and of cooperating with the respective authorities and other services.
Adria Airways d.d. Annual Report 2004 51
A1818. Quality commitment
In 2004, Adria Airways continued to maintain and to develop the quality commitment system, for which ISO 9001 Certifi-
cate was awarded by Slovenian Institute for Quality and Metrology in 2003.
By obtaining ISO 9001:2000, Adria Airways has rounded up the implementation of an overall quality commitment system.
The system comprises, in addition to a quality management system under ISO 9001:2000, also a quality system for aircraft
maintenance / Part-145, for which a certificate was obtained in 1999. On the basis of this certificate, Adria was appointed in
2002 one of the two authorised service centres for maintenance of the CRJ aircraft in the world.
The overall quality commitment system also comprises the quality system for commercial air transportation, JAR-OPS 1, for
which a certificate was obtained in 2001. On the basis of this certificate, Adria started to introduce flight routes within EU
in 2001.
Safety is first and foremost. The quality of Adria Airways in respect of safety was testified by IOSA Certificate (IATA
Operational Safety Audit Registry) that Adria obtained in August 2004 as one of the first twelve airlines in the world to
receive this safety certificate. The IOSA Standards define corporate organisation, operational procedures, flight security,
and corporate security.
Adria Airways d.d. Annual Report 200452
A1919. Research and development
• Adria Airways is dedicated to developing and strengthening its technical and managerial knowledge and experience in all
areas of civil aviation.
• Also in the future, Adria Airways will intensify its relations with various professional institutions.
• Adria Airways has cooperated with the Faculty of Mechanical Engineering of Ljubljana for more than 20 years. In 2002, a
new contract was signed under the amended law (EASA IR). Under this law, Adria Airways undertakes to provide practi-
cal training for graduates of the Faculty of Mechanical Engineering. The licences that can be obtained by young pilots in
Adria’s aviation school:
- PPL - Private Pilot Licence,
- CPL - Commercial Pilot Licence,
- IR - Instrument Rating), and
- ATPL - Airline Transport Pilot Licence.
• Adria Airways also participates in the EU ADAMS 2 project (Aircraft Dispatch and Maintenance Safety), which is in fact
the second part of the project Human Centred Operations in Aircraft Dispatch and Maintenance Safety.
• In the middle of 2004, our participation in the EU project ADAMS 2 (Aircraft Dispatch and Maintenance Safety), which
is the second part of the project Human Centred Operations in Aircraft Dispatch and Maintenance Safety, was success-
fully completed.
• Our participation in the European projects will be continued in 2005 by participation in the projects FLY SAFE and
HILAS (Human Integration into the Life-Cycle of Aviation Systems).
• Recently, Adria received the Part-147 Certificate, under which Adria is licensed to train aviation maintenance personnel.
• Under the sponsorship of the English company Capital Group, Adria obtained approval to provide type rating training
to third parties. The official approval for the operation of Aircraft Maintenance Training Organisation (AMTO) has also
been obtained from the English Civil Aviation Authority (UK CAA).
Adria Airways d.d. Annual Report 2004 53
A2020. Corporate communications
The corporate communications department strives to communicate effectively with various publics connected with our
company. Our goal is to contribute to the realisation of business objectives, the enhancement of corporate identity, and the
business effectiveness. Our communications principles are openness, proactive approach, transparency, interactive informa-
tion flow, quick response, and continuity.
Throughout 2004, Adria Airways communicated with internal and external publics via its many communications tools, and
implemented a number of activities and events.
Adria’s intranet sites are daily visited by most of its employees. The websites disclose data required by the employees at their
work, information on events in the company, and on topical aviation issues. The employees may respond, thus making the
communication interactive.
Adria Airways is aware that media are becoming a major factor in shaping public opinion through their permanent role in
communication and search of information. By implementing effective corporate communications strategy, Adria Airways
secures public informedness about the operations of our company. The analysis of the company’s presence in the Slovene
media showed that in 2004 Adria Airways was mentioned in more than 250 articles and topics. Most of the articles (98%)
reported favourably or neutrally.
Four In-Flight Magazines were issued for Adria’s passengers. The purpose of this magazine is to promote Adria Airways and
our country. The magazine gets a positive response from passengers and various institutions, which use the magazine to
promote Slovenia.
The principal publication for business and financial publics was the annual report.
Adria Airways d.d. Annual Report 200454
A2121. Who is who, contacts
Managing Board of the Company
Dr. Branko Lučovnik, president of the Managing Board / [email protected]
Directors of sectors and areas
Bojan Sodnik, director of sector Sales and Marketing / [email protected]
Marija Rotar, director of sector Finance and Accounting / [email protected]
Damjan Franetič, assistant president of the Board / [email protected]
Jure Srhoij, assistant president of the Board for HR and Legal / [email protected]
Tomaž Kostanjšek, director of sector Ground Operations / [email protected]
Pavel Prhavc, director of sector Aircraft Maintenance / [email protected]
Tomaž Markun, director of sector Flight Operations / [email protected] (since March 2005 – director of sector Flight
Operations Dejan Slodej / [email protected])
Emil Kumer, director of area General Support / [email protected]
Members of the Supervisory Board
Shareholders’ representatives
Peter Grašek, president
Mirjana Gaspari
Alojz Jamnik
Igor Zajec
Employees’ representatives
Borut Janžekovič, until 21 June 2004
Deana Potza, since 21 June 2004
Tomaž Pečnik
Adria Airways d.d. Annual Report 2004 55
A2222. Organisational structure of the company
Subsidiary companies
The principal activity of the subsidiary company Amadeus Slovenija d.o.o. is marketing of the booking system and the Ama-
deus software for airlines and agents engaged in booking and sale of air tickets.
The subsidiary company AAM EAR Servis d.o.o. has its registered office in Macedonia and covers exclusively the market in
Macedonia. Its principal activities are the sale of air tickets and the supervision of flights at Skopje Airport, the sale of air
tickets on behalf of the parent company and other airlines in Skopje, provision of services by use of the booking system, and
training of agents in Macedonia.
Since their incorporation, both subsidiary companies have recorded net profit, have decreased the cost of the booking
system of the parent company, and have expanded the market share of the company.
General Meeting
Supervisory Board
President
Managing Board
Aircraft
Maintenance
Ground
Operations
Sales and
MarketingFinance and
Accounting
Flight
Operations
Corporate
Communications
Strategic Planning
and Development
Amadeus
Slovenija d.o.o.
AAM EAR SERVIS
d.o.o. Skopje
Safety and Security
(JAR-OPS1,
Safety at Work)
Quality Systems
(ISO9001,
JAR-OPS1 & 145)
General
Support
Human Resources
and Legal
Subsidiaries
Adria Airways d.d. Annual Report 200456
A2323. Representative offices and points of sale
The sales market has been expanded and the quality of services provided to passengers in foreign airports supervised
through Adria’s representative offices.
In 2004, the representative office in Skopje was closed and the sales representation organised through an authorised repre-
sentative.
In order to secure traffic regularity and to provide better services to passengers at the destination Brussels, Adria has de-
cided to open an own representative office in Brussels.
LJUBLJANA
Information and booking:
Adria Airways d.d.
Kuzmičeva 7, 1000 Ljubljana
Tel.: 386 (0)1 36 91 010 - Call Centre
Fax: 386 (0)1 43 68 606
SITA: LJURMJP
E-mail: [email protected]
Pay-free number: 080 13 00
Booking office:
Adria Airways d.d.
Gosposvetska 6, 1000 Ljubljana
Fax: 386 (0)1 23 21 668
SITA: LJURPJP, LJUTBJP
E-mail: [email protected]
LJUBLJANA Airport
Pay-free number: 080 13 00
Fax: 386 (0)4 23 63 461
SITA: LJUKKJP
E-mail: [email protected]
KOPER
Adria Airways d.d.
Pristaniška 41, 6000 Koper
Brezplačna številka: 080 13 00
Faks: 386 (0)5 66 35 902
SITA: LJUTDJP
E-mail: [email protected],
MARIBOR
Adria Airways d.d.
Vita Kraigherja 5
p. p. 1555, 2001 Maribor
Pay-free number: 080 13 00
Fax: 386 (0)2 23 02 903
SITA: MBXTOJP
E-mail: [email protected]
AMSTERDAM, Netherlands
Air Agencies Holland B.V.- authorised agency
GSA Adria Airways - The Netherlands
Rotterdam Airportplein 20
NL-3045 AP Rotterdam
Tel.: 31 (0)10 20 83 606 (direct phone No.)
Fax: 31 (0)10 20 83 699
E-mail: adr.amstown@adria-si
SITA: RTMRRDM
Adria Airways booking office
at the Amsterdam-Schipol Airport
Departure Hall 3 central
Tel.: 31 (0)20 31 64 240
Fax: 31 (0)20 31 64 241
E-mail: [email protected]
SITA: SPLTDXH
BRUSSELS, Belgium
Adria Airways
Brussels Airport – Box 4
Bosstraat 18
1930 Zaventem
Tel.: 32 (0)2 75 32 336
Fax: 32 (0)2 75 32 337
SITA: BRUTOJP
E-mail: [email protected]
Adria Airways booking office
at the Zaventem Airport / Brussels
Tel.: 32 (0)2 75 32 335
SITA: BRUAPJP
KO/BENHAVN, Denmark
Antello AB, Tings gatan 2, authorised a agency
256 56 Helsingborg, SWEDEN
Tel.: 46 (0)42 28 47 78
Fax: 46 (0)42 14 47 78
Mobile.: 46 708 28 47 78
E-mail: [email protected]
Adria Airways booking office
at the Copenhagen Airport
Terminal 2, Floor 2, Office 230
2770 Kastrup, Denmark
Tel.: & Faks:45 (0)32 51 59 59
Mobile.: 46 708 28 47 78
E-mail: [email protected]
FRANKFURT, Germany
Adria Airways
Frankfurt Airport, Terminal 1, Building 201,
Room 201, 4043/4044,
P.O. Box 039 60547 Frankfurt am Main
Tel.: 49 (0)69 269 56 720, 269 56 721
Fax: 49 (0)69 269 56 730
SITA: FRATBJP, FRAAPJP
E-mail: [email protected]
Adria Airways booking office
at the Frankfurt Airport
Terminal 1, Hall B, Sales Desk 307
60547 Frankfurt am Main
Tel.: 49 (0)69 269 56 722
ISTANBUL, Turkey
Adria Airways, authorised agency
Ordu Cad No. 206/1,
34470 Laleli, Istanbul
Tel.: 90 (0)212 51 24 232
Fax: 90 (0)212 51 24 234, 51 25 436
E-mail: [email protected]
SITA: ISTTOJP
LONDON, Great Britain
Adria Airways
49 Conduit Street
London W1S 2YS
Tel.: 44 (0)20 7 73 44 630, 43 70 143
Fax: 44 (0)20 7 28 75 476
E-mail: [email protected]
SITA: LONTOJP
Adria Airways
London Gatwick Airport
Ticket-issuing agency: Aviance
Adria Airways d.d. Annual Report 2004 57
A23North Terminal Ticket desk
Tel.: 44 (0)1293 507 182
Fax: 44 (0)1293 507 144
SITA: LGWNTXH
MOSCOW, Russia
Adria Airways
Derbenevskaja 4
113 114 Moscow
Tel.: 7 (0)95 727 08 85,
Fax: 7 (0)95 727 08 88
E-mail: [email protected]
SITA: MOWTOJP
Adria Airways booking office
at the Airport Sheremetyevo-2,
2nd Floor, SAS
Tel.: 7 (0)95 231 4747
MÜNCHEN, Germany
Adria Airways
Munich Airport, Terminal B
Verwaltungsgebäude Nord, Level 04, Room
1314/1316, Terminal Strasse Nord 1
85356 Munich Airport,
P.O. Box 241233, 85334 Munich
Tel.: 49 (0)89 975-91191, 91192
Fax: 49 (0)89 975-91196
SITA: MUCTOJP
E-mail: [email protected]
OHRID, Macedonia
AAM, authorised agency
Tel.& Fax: 389 (0)46 250 190
Tel.: 389 (0)46 262 026,
SITA: OHDXHAP
E-mail: [email protected]
Adria Airways Ticket Office,
Ohrid Airport
Tel.: & Fax: 389 (0)46 262 503, 252 820, 252
821 ext. for AAM 115
PARIS, France
Adria Airways
38 Avenue de l’Opera
75002 Paris
Tel.: 33 (0)1 47 42 95 00
Fax: 33 (0)1 47 42 00 67
SITA: PARTOJP
E-mail: [email protected]
PODGORICA, Serbia and Montenegro
Adria Airways, authorised agency
OKI AIR INTERNATIONAL
Ivana Vujoševiča 46
81000 Podgorica
Tel.: 381 81 201 201
Tel.: & Fax 381 (0)81 241 154,
Mobile: 381 (0)67 241 154
E-mail: [email protected]
Adria Airways booking office
at the Podgorica Airport
OKI AIR INTERNATIONAL
Tel.: & Fax 381 81 62 32 32
Mobile: 381 (0)67 310 000
E-mail: [email protected]
Working hours: two hours before the flight and
30 minutes after the flight
PRISTINA, Serbia and Montenegro - Kosovo
Adria Airways, General Sales Agent
Adria Airways Kosovo L. L. C
Qamil Hoxha Nr. 12, 38000 Pristina
Tel.: 381 (0)38 246 746
Tel. & Fax 381 (0)38 246 747
Mobile: 00 377 44 16 50 84
E-mail: [email protected]
Airport Pristina Ticket office
Tel. & Faks 381 (0)38 54 84 37
Mobile: 00 377 44 50 12 40
Mobile: 00 377 44 50 12 41
SARAJEVO, Bosnia and Herzegovina
Adria Airways
Ferhadija 23/2
71000 Sarajevo
Tel.: 387 (0)33 23 21 25, 23 21 26
Fax: 387 (0)33 23 36 92
SITA: SJJTOJP
E-mail: [email protected]
SKOPJE, Macedonia
AAM, authorised agency
Ulica Dame Gruev, Gradski Zid, blok II bb
91000 Skopje
Tel.: 389 (0)2 31 17 009, 32 29 975
Fax: 389 (0)2 31 65 531
SITA: SKPTOJP
E-mail: [email protected]
Adria Airways booking office
at the Skopje Airport
Tel. & Fax: 389 (0)2 25 61 279
SPLIT, Croatia
Aeroplan d.o.o., Sales agent
Obala kneza Domagoja b.b.
Tel.: 385 (0)21 33 84 45, 33 84 446
Fax: 385 (0)21 33 84 47
E-mail: [email protected]
SITA: SPUTOJP, SPUAPJP
Aeroplan Ticket desk
Airport Split
Tel.: 385 (0)21 79 62 93, 89 52 74
Fax: 385 (0)21 79 62 94,
TEL AVIV, Israel
Mirus Services (1996) Ltd., authorised agency
General Sales Agent
8 Mendele Str.
Tel Aviv 63432
Tel.: 972 (0)3 52 23 161
Fax: 972 (0)3 52 40 895
Adria Airways booking office
at the Ben Gurion Airport
Laufer Aviation Ltd.
Tel.: 972 (0)3 97 74 300
Fax: 972 (0)3 97 12 022
VIENNA, Austria
Adria Airways booking office
Adria Airways Station
1300 Airport Vienna
Tel.: 43 (0)1 70 07 36 913
Fax: 43 (0)1 70 07 36 914
Mobile: 00 43 664 30 87 813
SITA: VIETOJP, VIEKKJP
E-mail: [email protected]
ZAGREB, Croatia
Adria Airways
Praška 9, 10000 Zagreb
Tel.: 385 (1) 48 10 011, 48 10 016
Faks: 385 (1) 48 10 008
SITA: ZAGTOJP
E-mail: [email protected]
ZÜRICH, Switzerland
Adria Airways
Loewenstrasse 54/II. 8001 Zurich
Tel.: 41 (0)1 21 26 393, 21 26 394
Fax: 41 (0)1 21 25 266
E-mail: [email protected]
SITA: ZRHTOJP
Adria Airways booking office
at the Zurich Airport
Terminal B-2-521
Tel.: 41 (0)43 81 64 437
SITA: ZRHKOJP
On-line booking
www.adria-airways.com
Adria Airways d.d. Annual Report 200458
A
Adria Airways d.d. Annual Report 2004 59
B
Adria Airways d.d. Annual Report 2004 59
2nd part
Financial Statements
Adria Airways d.d. Annual Report 200460
B
Adria Airways d.d. Annual Report 200460
Adria Airways d.d. Annual Report 2004 61
BContents
1 General disclosures 62
2 Statement of management’s responsibility for financial reporting 63
3 Financial Statements 64
3.1 Balance Sheet 64
3.2 Income statement 65
3.3 Cash flow statement 66
3.4 Statement of changes in equity in 2004 67
3.5 Accumulated profit 69
4 Summary of significant accounting policies 70
5 Notes to the financial statements 75
5.1 Disclosures of items in the balance sheet 75
5.1.1 Tangible fixed assets 75
5.1.2 Long-term investments 76
5.1.3 Inventories 77
5.1.4 Operating receivables 78
5.1.5 Short-term investments 79
5.1.6 Cash in banks, cheques, and cash in hand 79
5.1.7 Capital 79
5.1.8 Long-term financial and operating liabilities 80
5.1.9 Short-term financial and operating liabilities 81
5.1.10 Off balance sheet items 82
5.2 Disclosures of items in the income statement 82
5.2.1 Net sales 83
5.2.2 Cost of goods, materials, and services 83
5.2.3 Labour cost 84
5.2.4 Amortisation and depreciation expense 84
5.2.5 Financial revenues 85
5.2.6 Financial expenses 85
5.2.7 Income tax 85
5.2.8 Net profit or loss for the period 86
6 Other disclosures 87
6.1 Information on groups of persons 87
6.2 Financial ratios 87
7 Financial statements – expanded form 89
7.1 Balance sheet – expanded form under SAS 89
7.2 Income statement – expanded form under SAS 91
Adria Airways d.d. Annual Report 200462
B11. General disclosures
Company profile
ADRIA AIRWAYS d.d.
Kuzmičeva 7, 1000 Ljubljana
Slovenia
Object of the Company
• The principal activities of Adria Airways d.d. are scheduled air transport and non-scheduled (charter) air transport. In
addition, the Company is engaged in transport of freight, maintenance of aircraft for third parties, and training of flight
crew.
Staff
• Number of staff as at 31 December 2004: 552
Average number of employees per level of education: :
Level of education I. II. III. IV. V. VI. VII. VIII. IX. Total
Total 4 10 4 48 234 133 117 1 1 552
Adria Airways d.d. Annual Report 2004 63
B22. Statement of management’s responsibility for financial reporting
The managing board approves the financial statements for the year ended 31 December 2004 presented in this annual
report (pages 46 through 69 and 89 through 91), the applied accounting policies, and the notes to the financial statements
presented herein (pages 70 through 88).
The managing board is responsible for the preparation of the annual report, which is designed to provide fair presentation
of the financial position of the Company and the results of its operations for the year ended 31 December 2004.
The managing board is responsible for the consistent application of the relevant accounting policies and the preparation of
accounting estimates in compliance with the principle of prudence and the principle of operating efficiency in accounting.
The managing board confirms that the financial statements and the notes to the financial statements are prepared on the
basis of assumption of a going concern, and in conformity with the current legislation and Slovenian Accounting Stand-
ards.
The managing board is responsible for the adequacy of accounting, for taking adequate measures to secure the property of
the Company, as well as for the prevention and detection of frauds and other irregularities.
Dr. Branko LučovnikPresident of the Management Board
9 May 2005
Adria Airways d.d. Annual Report 200464
B33. Financial Statements
3.1 Balance Sheet1
(in thousand SIT) Notes 31 Dec 2004 31 Dec 2003
Assets 25,633,650 27,651,999
A Fixed assets 20,192,753 22,314,656
I. Intangible fixed assets 36,176 39,751
II. Tangible fixed assets 5.1.1 19,899,668 21,999,543
III. Long-term investments 5.1.2 256,909 275,362
B Current assets 5,220,880 5,251,854
I. Inventories 5.1.3 759,075 692,968
II. Operating receivables 5.1.4 3,389,322 2,993,117
III. Short-term investments 5.1.5 734,623 1,076,761
IV. Cash in banks, cheques, cash in hand 5.1.6 337,860 489,008
C Deferred costs (expenses) and accrued revenues 220,017 85,489
Off balance sheet items 21,388,402 21,456,658
Liabilities 25,633,650 27,651,999
A Capital 5.1.7 9,918,340 9,873,098
I. Called-up capital 812,436 812,436
II. Capital reserves 3,630,211 3,630,211
III. Revenue reserves 4,004,560 3,867,245
IV. Net profit or loss from previous periods 129,511 202,466
V. Net profit or loss for the period 21,234 53,344
VI. Capital revaluation adjustments 1,320,388 1,307,396
B Provisions 4,962 4,782
C Financial and operating liabilities 15,530,464 17,598,537
a) Long-term financial and operating liabilities 5.1.8 9,612,520 11,626,727
b) Short-term financial and operating liabilities 5.1.9 5,917,944 5,971,810
D Accrued costs (expenses) and deferred revenues 179,884 175,582
Off balance sheet items 5.1.10 21,388,402 21,456,658
The Notes to the financial statements are to be considered a component part of the financial statements.
1 For expanded balance sheet refer to Enclosure 10.1
Adria Airways d.d. Annual Report 2004 65
B33.2 Income statement2
(in thousand SIT) Notes 2004 2003
1. Net sales 5.2.1 31,643,918 28,373,526
2. Production cost of goods sold (including depreciation
and amortisation) and/or cost of goods sold 5.2 (25,775,206) (22,984,724)
3. Gross profit or loss 5,868,712 5,388,802
4. Selling cost (including amortisation and depreciation expense) 5.2 (4,030,910) (3,657,829)
5. General and administration expense (including amortisation and depreciation expense) 5.2 (1,037,049) (885,070)
6. Other operating revenues (including operating revenues from revaluation) 105,777 62,083
7. Financial revenue from shares 5.2.5 9,113 30,919
8. Financial revenue from long-term receivables 5.2.5 638 461
9. Financial revenue from short-term receivables 5.2.5 821,201 1,232,273
10. Financial expenses for long-term and short-term investment write-offs 5.2.6 - (1)
11. Interest expenses and financial expenses for other liabilities 5.2.6 (1,568,088) (2,066,041)
13. Net profit or loss from ordinary activities 169,394 105,597
14. Extraordinary revenues 14,778 95,493
15. Extraordinary expenses (86,481) (65,802)
16. Extraordinary profit or loss (71,703) 29,691
17. Income tax 5.2.7 (55,223) (28,600)
19. Net profit or loss for the period 5.2.8 42,468 106,688
The Notes to the financial statements are to be considered a component part of the financial statements.
2 For expanded income statement refer to Enclosure 10.2
Adria Airways d.d. Annual Report 200466
B33.3 Cash flow statement
(in thousand SIT) 2004 2003
A Cash flows from operating activities
a) Inflows 31,133,381 28,395,070
Operating revenues 31,693,265 28,376,911
Extraordinary revenue associated with operations 14,778 95,493
Opening less closing operating receivables (440,134) (104,112)
Opening less closing deferred costs (expenses) and accrued revenues (134,528) 26,778
b) Outflows (29,194,153) (25,266,977)
Operating expenses excluding depreciation (amortisation) and long-term provisions (28,807,888) (25,330,474)
Extraordinary expenses associated with operations (86,481) (65,802)
Income tax and any other tax not included in operating expenses (55,223) (28,600)
Closing less opening inventories (139,017) (71,859)
Opening less closing operating liabilities (79,180) 251,359
Opening less closing accrued costs (expenses) and deferred revenues (26,364) (21,601)
c) Net cash from operating activities 1,939,228 3,128,093
B Cash flows from investing activities
a) Inflows 870,590 1,281,710
Finance revenue associated with investing activities (excluding revaluation) 825,020 1,263,653
Offset decrease in long-term investments (excluding revaluation) 22,159 3,191
Offset decrease in short-term investments (excluding revaluation) 23,411 14,866
b) Outflows 302,208 (212,038)
Offset increase in intangible fixed assets (24,716) (15,531)
Offset increase in tangible fixed assets (excluding revaluation adjustment) 277,492 (196,507)
c) Net cash used in investing activities 568,382 1,069,672
C Cash flows from financing activities
a) Inflows 73,501 -
Offset increase in short-term financial liabilities 73,501 -
b) Outflows (3,050,986) (3,444,691)
Financial expenses associated with financing activities (excluding revaluation) (1,551,311) (2,066,042)
Decrease in capital (excluding net profit or loss for the period) (10,218) (3,546)
Offset decrease in short-term financial liabilities (excluding revaluation adjustment) - (46,894)
Offset decrease in long-term financial liabilities (1,489,457) (1,328,209)
c) Net cash used in financing activities (2,977,485) (3,444,691)
D Cash and cash equivalents3 at end of period 1,026,099 1,495,974
a) Net increase / decrease in cash and cash equivalents (469,875) 753,074
b) Cash and cash equivalents at beginning of period 1,495,974 742,900
3 Cash equivalents also include short-term deposits or call deposits recorded under short-term investments in the amount of 688,239 thousand SIT (2003: 1,006,966
thousand SIT).
Adria Airways d.d. Annual Report 2004 67
B33.4 Statement of changes in equity in 2004C
alle
d-up
capi
tal
Cap
ital
re
serv
es
Rev
enue
res
erve
s
Net
pro
fit
or lo
ss
from
pre
viou
s pe
riod
sN
et p
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b) A
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09
12
9,5
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21
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41
,307
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61
2,9
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9,9
18
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0
Adria Airways d.d. Annual Report 200468
B3Statement of changes in equity in 2003
Cha
nges
in e
quit
yC
alle
d-up
capi
tal
Cap
ital
re
serv
esR
even
ue r
eser
ves
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ss
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the
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tsTo
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ousa
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er
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from
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Net
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fit (l
oss)
for
the
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d
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eral
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ity
reva
luat
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A B
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s at
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20
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9
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- -
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- 10
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d) N
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for
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- -
- -
106
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- 10
6,6
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C T
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fer
with
in e
quity
- -
53
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4
20
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66
(1
42
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3)
(11
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- -
a)
Ap
prop
riatio
n of
ne
t pr
ofit
for
the
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d in
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ance
w
ith
the
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lutio
n ad
opte
d by
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- -
53
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4
- -
(53
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- -
b)
Appr
opria
tion
of n
et p
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for
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per
iod
to
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r re
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n ac
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ance
with
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olut
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ted
by th
e sh
areh
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g -
- -
20
2,4
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(2
02
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6)
- -
-
f) O
ther
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s w
ithin
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ity-
- -
- 5
9,9
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(5
9,9
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)-
-
Č T
rans
fer
from
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ity
- -
- -
(3,5
46
)-
(3,5
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)
a) D
ivid
ends
pay
out,
rem
uner
atio
nto
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agem
ent B
oard
- -
- -
(3,5
46
)-
- (3
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6)
D B
alan
ce a
s at
31
Dec
20
03
812
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6
3,6
30
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1
11
3,3
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3,7
53
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8
20
2,4
66
5
3,3
44
1
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,39
6
9,8
73
,09
8
Adria Airways d.d. Annual Report 2004 69
B33.5 Accumulated profit
(in thousand SIT) 2004 2003
Net profit or loss for the period + 42,468 106,688
Net profit or loss from previous periods + 129,511 202,466
Increase in revenue reserves - 21,234 53,344
Accumulated profit 150,745 255,810
Adria Airways d.d. Annual Report 200470
B44. Summary of significant accounting policies
Basis for preparation of financial statements
• The financial statements of the Company have been prepared in compliance with Slovenian Accounting Standards issued
by Slovenian Institute of Auditors in 2001.
• The financial statements have been prepared in compliance with the general rules on the breakdown of the balance sheet
and the income statement, the valuation of items in the financial statements, the contents of the enclosures to the finan-
cial statements, and the requirements in respect of preparation of the Management’s Report. The observation of these
rules ensures true and fair presentation of the Company’s operations in the Annual Report. The fundamental accounting
assumptions underlying the preparation of the financial statements are: accrual, going concern, and true and fair presen-
tation under a fluctuating value of Euro and individual prices.
• Adria Airways d.d. has kept its subsidiary records in compliance with the recommendations of ICAO (International Civil
Aviation Organization), whose member has been the Republic of Slovenia.
• The financial statements are presented in Slovenian tolars, rounded to the nearest thousand.
Exchange rate and translation into local currency
• Purchase and sale transactions, investments, long-term and short-term liabilities, long-term and short-term receivables
denominated in foreign currencies are translated into local currency (SIT) at the middle exchange rate of the Bank of
Slovenia ruling at the date of transaction. The balances as at 31 December arising from these transactions are translated
into local currency at the exchange rate of the Bank of Slovenia ruling at the balance sheet date.
• Exchange gains and losses associated with short-term operating receivables and liabilities are recorded in the income state-
ment under financial revenue or financial expenses, respectively.
Reporting by business segment and geographical segment
• The Company operates in the following business segments: scheduled air transport of passengers, air transport of freight,
non-scheduled air transport of passengers (charter flights), servicing of aircraft for third parties, and other activities.
• Net sales revenues are reported by business segment. Other information is not disclosed.
• The Company does not report by geographical segment.
Intangible fixed assets
• An item of intangible fixed assets is recognised at cost. An intangible fixed asset is amortised over its useful life, which as
a rule does not exceed five years.
• Intangible fixed assets are not revalued due to increase in value.
Tangible fixed assets
• Tangible fixed assets are land, buildings, production plant and equipment, and other equipment. Tangible fixed assets
that are ready for use also include low-value assets whose useful life exceeds one year and whose cost as per supplier’s
Adria Airways d.d. Annual Report 2004 71
B4invoice does not exceed the tolar equivalent of EUR 500. Tangible fixed assets under construction or manufacture also
include spare parts.
• The cost of an item of tangible fixed assets comprises its purchase price, as well as directly attributable costs of bringing
the asset to working condition for its intended use. Subsequent expenditure on an item of tangible fixed assets increases
its cost when it increases its future economic benefits in excess of the originally assessed future economic benefits. The
subsequent expenditure enabling extension of the useful life of an asset, initially reduces the accumulated depreciation.
Land is stated at cost; if the cost is not known, land is stated at appraised value.
• Recognition of an item of tangible fixed assets in the bookkeeping records and the balance sheet is reversed when an
asset has been disposed or it has been permanently put out of use and no economic benefits may be expected from its
disposal. Gains on disposal of an asset are recorded under operating revenue from revaluation; the carrying amount of
the asset is recorded under operating expenses from revaluation.
• An item of tangible fixed assets is revalued by the change in the exchange rate of the foreign currency in which borrow-
ings raised for the purchase of the tangible fixed asset are denominated. The amortisation charge is subsequently recog-
nised as an expense against the adjusted cost of the asset resulting from revaluation.
Amortisation/Depreciation
• Over the entire useful life of an item of tangible fixed assets, depreciation expense is recognised on the basis of a sys-
tematic allocation of a depreciable amount of tangible fixed asset over individual accounting periods. The straight-line
method of depreciation is applied.
• Land is not depreciated.
• The rates of amortisation (depreciation) used in 2004:
Intangible/Tangible fixed assetLowest
%Highest
%
Intangible fixed assets
Computer software 25.00 25.00
Tangible fixed assets
Buildings:
Buildings built of brick, stone or concrete 1.50 2.50
Other buildings 2.00 12.50
Plant and equipment:
Production plant and equipment – aircraft 4.38 5.00
Production plant and equipment – rotating spare parts 10.00 10.00
Other equipment 8.30 20.00
Computer equipment:
Hardware 25.00 25.00
Motor vehicles:
Transport vehicles – vans 12.50 14.30
Passenger cars 12.50 15.50
Other tangible fixed assets – low-value assets 25.00 33.00
Adria Airways d.d. Annual Report 200472
B4Investments
• Investments of all categories are initially recognised at cost. Long-term and short-term investments are recorded sepa-
rately.
• Long-term investments in subsidiaries are accounted for using the equity method. Under the equity method, the carry-
ing amount of investments is increased to recognise the controlling company’s share of net profit of the subsidiary. The
revaluation effect results in an increase in financial revenue recorded by the controlling company.
• To reflect their impairment, financial investments are revalued; the adjustment of their initially recorded value is charged
against financial expenses for long-term and short-term investment write-offs.
• A portion of long-term investments maturing in less than one year from the balance sheet date is recorded under short-
term financial investments.
Receivables
• Operating receivables are classified into long-term and short-term receivables. They comprise trade receivables, other
receivables associated with operating revenue, receivables associated with financial revenue, receivables associated with
equity formation, and other receivables in association with assets transformation.
• Receivables of all categories are initially recognised at amounts recorded in the relevant bookkeeping documents under
the assumption that they will be collected.
• Receivables not believed to be either settled in their full amount or by their due date are recorded as doubtful receivables.
Receivables in connection with which a dispute has developed with the debtor are recorded as disputable receivables.
Allowances for doubtful and disputable receivables are formed in their full amount. The collectability of receivables by
customer is determined monthly and at the year-end.
• Receivables due from foreign legal entities and natural persons are translated into local currency at the date of origin.
Exchange gains or losses arising in the period from the date of settlement of an account receivable and to the date of
statement of financial position, are recorded as an item of financial revenue or financial expenses.
Inventories
• An item of inventories is initially recognised at cost.
• The consumption of materials is accounted for using the FIFO method.
• Allowances for inventories are formed due to decrease in value of inventories to their realisable value; they are charged
against operating expenses.
Cash
• Cash comprises cash in hand, cash in banks (deposit money), and cash in transit. Cash in hand includes banknotes,
coins, cheques received, and securities with immediate liquidity. Deposit money comprises cash in banks and other
financial institutions, which may be used for payment. Cash in transit denotes cash transferred from the cash box to the
account with a bank or other financial institution and not recorded as cash in bank on the same day.
• An item of cash is initially recognised at an amount arising from the relevant document, upon verification of its nature.
• An item of cash denominated in a foreign currency is translated into local currency at the middle exchange rate of the
Bank of Slovenia effective on the date of receipt.
Adria Airways d.d. Annual Report 2004 73
B4Capital
• Total capital of a company is the company’s liability to its owners. It is defined by the amounts invested by owners and the
amounts generated during operation that belong to the owners.
• Total capital consists of called-up capital, capital reserves, revenue reserves, net profit or loss from previous periods, unap-
propriated net profit or loss for the period, and equity revaluation adjustments.
• Share capital is recorded in local currency.
Liabilities
• Liabilities may be financial or operating, short-term or long-term.
• An item of short-term and long-term liabilities of all categories is initially recognised at the amount arising from the
relevant document, provided that its settlement is required by creditors.
• Long-term financial liabilities denominated in foreign currencies are initially translated into local currency at the
exchange rate effective on the date of transaction. An exchange difference resulting from a change in the exchange rate
between the transaction date and the balance sheet date is included in the carrying amount of the tangible fixed asset, for
which long-term borrowings in a foreign currency have been raised.
• Operating liabilities denominated in foreign currencies are translated into local currency at the date of transaction. An
exchange difference resulting from a change in the exchange rate between the transaction date and the balance sheet date
is recorded as an item of financial revenue or financial expenses.
• Short-term financial liabilities are liabilities from short-term borrowings that are due to be settled in a period of no more
than one year.
• Prior to the preparation of the financial statements, the fair value of short-term operating liabilities is determined on the
basis of contracts, reconciliation of balances, and other financial instruments.
Recognition of revenues
• Revenue is recognised if increases in economic benefits during the accounting period are associated with increases in as-
sets or decreases in liabilities, and the increases can be measured reliably.
• Sales revenue includes revenue generated from the sale of products and merchandise, material and services rendered dur-
ing the accounting period. Sales revenue is recognised when it is probable that cash receipts will flow from them. At the
time of sale, trade discounts and volume rebates given are deducted from revenue; they must be clearly indicated either in
the invoices or other relevant documents. Subsequently, revenue is also reduced by the sales value of returned goods and
additionally approved discounts or rebates.
• Operating revenue from revaluation arises in association with disposal of intangible fixed assets and tangible fixed assets,
when increases in their carrying amount arising from a prior increase in value are no longer held in capital revaluation
adjustments.
• Financial revenue is the revenue generated from investment activities. It arises in association with long-term and short-
term investments, as well as in association with receivables. Financial revenue is recognised when statements of account
are prepared, regardless of cash receipts associated with them, unless there exists significant uncertainty associated with
their amount, maturity date, and collectability. Interest is recognised on a time proportion basis, taking into account the
principal outstanding and the rate applicable.
• Extraordinary revenue includes unusual items. It is recognised at actual amounts.
Adria Airways d.d. Annual Report 200474
B4Recognition of expenses
• Expenses are recognised if decreases in economic benefits during the accounting period are associated with decreases in
assets or increases in liabilities, and the decreases can be measured reliably.
• Operating expenses from revaluation are recognised upon revaluation, regardless of their impact on profit and loss. Oper-
ating expenses from revaluation arise in association with the impairment of tangible fixed assets, intangible fixed assets,
and operating current assets.
• Financial expenses include financing expenses and investment expenses. Financial expenses from revaluation arise in
association with the impairment of long-term and short-term investments, and the increase in value of long-term and
short-term debts.
• Extraordinary expenses include unusual items. They are recognised at actual amounts.
Taxes
• The Company is subject to corporate income tax (25%). In 2004, income tax liabilities were recorded in the amount of
55.2 million SIT.
Cash flow statement
• The cash flow statement shows the impact of inflows and outflows on changes in cash and cash equivalents in the ac-
counting period.
• The cash flow statement has been prepared in the form based on the indirect method of reporting (Format II), using data
included in the balance sheet as at 31 December 2004, the balance sheet as at 31 December 2003, the income statement
for the year ended 31 December 2004, and additional data required for the adjustment of items not representing inflows
and outflows.
Disclosures
• In the Annual Report 2004, all significant accounting transactions, receivables, liabilities, expenses, revenues, risks, and
significant events after the balance sheet date have been disclosed.
• The information that would be considered a disclosure of business secrets, the personal data, and other confidential
information have not been disclosed, in order to not cause harm to the Company or to individual persons.
Adria Airways d.d. Annual Report 2004 75
B55. Notes to the financial statements
5.1 Disclosures of items in the balance sheet
5.1.1 Tangible fixed assets
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Land 166,343 166,343
Buildings 1,208,001 1,254,460
Plant and equipment, of which: 18,328,906 20,558,198
* production plant and equipment 18,116,822 20,335,668
- aircraft 17,186,252 19,292,790
- rotating spare parts 930,570 1,042,878
* other plant and equipment 212,084 222,530
- other equipment 209,135 220,796
- low-value assets 2,949 1,734
Tangible fixed assets being acquired, of which: 196,418 20,542
*advances for tangible fixed assets 100,239
*tangible fixed asset in course of construction 96,179 20,542
Total 19,899,668 21,999,543
• The major item under intangible fixed assets is aircraft, consisting of A-320 aircraft (3) and CRJ-200-LR regional aircraft
(4). There were no additions in 2004. Disposals included depreciation expense. Straight-line depreciation was applied.
A-320 aircraft was depreciated at 4.38 % and CRJ-200-LR regional aircraft at 5 %. Aircraft is initially recorded in the cur-
rency in which the contract is made (US Dollar).
• Net sales value of aircraft is verified twice a year on the basis of The Aircraft Value Reference published by Aircraft Value
Analysis Company (AVAC). In addition, an appraisal by a certified business appraiser was ordered in the beginning of
2004 of the fleet of Canadair aircraft as at 31 December 2003 (the fleet of Canadair regional aircraft represents a separate
cash-generating unit of assets). According to the appraisal, the recoverable value of the fleet of Canadair aircraft substan-
tially exceeds its carrying amount as at 31 December 2003. Considering the fact that key assumptions of the valuation as
at 31 December 2003 have not changed, the management of the Company believes that there are no indicators requiring
asset impairment.
• All long-term financial liabilities are secured by lien (the first lien and, partly, the second lien on the S-AAA aircraft)
on the two A-320 aircraft (S5-AAA, S5-AAC, and a spare motor for A-320 aircraft, serial no. 065), the four CRJ-200-LR
regional aircraft (S5-AAD, S5-AAE, S5-AAF, S5-AAG), and the rotating spare parts for CRJ-200-LR regional aircraft. The
pledged aircraft and rotating spare parts are owned by Adria Airways.
• With effect from 31 January 2004, an additional CRJ aircraft has been leased under the operating lease contract. Conse-
quently, cost of rentals has increased. As at 31 December 2004, the Company has two CRJ aircraft in lease.
• In December 2004, the Company entered two contracts for a hangar construction to be carried out in 2005, amounting
to 459,004 thousand SIT. In January 2005, a contract for the purchase of a new CRJ aircraft in 2005 was signed, amount-
ing to 3,238,467 thousand SIT.
Adria Airways d.d. Annual Report 200476
B5Movement of tangible fixed assets in 2004
(in thousand SIT) Land Buildings
Production plant and
equipment- aircraft
Rotating spareparts
Other equipment
Low-value tools
Advances for tangible
fixedassets
Tangiblefixed assetsin course of
construction Total
Cost
Balance as at31 Dec 2003
166,343 2,505,153 31,758,976 2,693,492 1,299,676 12,133 - 20,542 38,456,315
Direct additions - 15,424 - - - - 100,239 210,711 326,377
Transfer from TFAunder construction
- - - 77,794 54,879 2,318 - (134,991) -
Disposals - (32,753) - (61,352) (85,164) (394) - - (179,663)
Other changes –exch. differences
- - (1,498,899) (30,368) - - - (83) (1,529,350)
Balance as at31 Dec 2004
166,343 2,487,827 30,260,077 2,679,566 1,269,391 14,057 100,239 96,179 37,073,679
Accumulateddepreciation
Balance as at31 Dec 2003
- 1,250,693 12,466,186 1,650,614 1,078,880 10,399 - - 16,456,772
Depreciation expense - 33,531 1,577,121 172,348 57,495 1,103 - - 1,841,598
Disposals - (19,825) - (30,605) (76,119) (394) - - (126,943)
Additions - 15,427 - - - - - - 15,427
Other changes –exch. differences
- - (969,482) (43,361) - - - - (1,012,843)
Balance as at31 Dec 2004
- 1,279,826 13,073,825 1,748,996 1,060,256 11,108 - - 17,174,011
Carrying amountas at 31 Dec 2004
166,343 1,208,001 17,186,252 930,570 209,135 2,949 100,239 96,179 19,899,668
Carrying amountas at 31 Dec 2003
166,343 1,254,460 19,292,790 1,042,878 220,796 1,734 - 20,542 21,999,543
5.1.2 Long-term investments
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Shares in subsidiaries 233,523 250,131
Shares in other companies 21,086 22,581
Long-term investments in debts 2,300 2,650
Total long-term investments 256,909 275,362
• Adria Airways d.d. does not prepare the consolidated financial statements, because the inclusion of the financial state-
ments of the two subsidiaries in the consolidated financial statements is not material for the true and fair presentation of
the financial statements of the Adria Airways Group as a whole.
Adria Airways d.d. Annual Report 2004 77
B5Subsidiary
(in thousand SIT) Registered office CountryShare in %
31 Dec 2004
Share capital of the subsidiary as at
31 Dec 2004Profit or loss
for 2004Shares in subsidiaries
31 Dec 2004 31 Dec 2003
AmadeusSlovenija d. o. o.
Dunajska 122,Ljubljana
Slovenia 95% 228,325 4,102 216,909 213,013
AAM EARServis d. o. o.
Gradski zidBlok 4/8, Skopje
Macedonia 51% 74,978 45,648 16,614 37,118
TOTAL 233,523 250,131
• The decrease in the value of investments in subsidiaries is due to the payment of profit participation in AAM EAR Servis
d.o.o., Skopje. After the concluded verification of the financial statements of the said company, among other items also
of the collectability of trade receivables, the Company acted in accordance with the principle of prudence and did not
perform a write-up of the proportional share in profit of the subsidiary in Skopje.
Movement of long-term investments in 2004
(in thousand SIT) Group company Other companies Loans to other entities Total
Balance as at 1 Jan 2004 250,131 22,582 2,650 275,363
Increase 5,884 48 5,932
Decrease 21,802 357 22,159
Revaluation (690) (1,543) 7 (2,226)
Balance as at 31 Dec 2004 233,523 21,087 2,300 256,910
Value adjustment
Balance as at 1 Jan 2004 - 1 - 1
Increase - - - -
Decrease - - - -
Balance as at 31 Dec 2004 - 1 - 1
Carrying amount as at 1 Jan 2004 250,131 22,581 2,650 275,362
Carrying amount as at 1 Jan 2004 233,523 21,086 2,300 256,909
5.1.3 Inventories
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Materials 1,738,954 1,559,638
Inventory surplus - 44
Inventory deficit (2,041) (162)
Allowances (977,838) (866,552)
Total 759,075 692,968
• The major item of inventories comprises permanent inventories of spare parts and expendable materials for aircraft main-
tenance. The optimisation of inventories is performed in accordance with the aircraft manufacturer’s recommendations
and dependent on the number of aircraft.
• In 2004, the Company considered the estimated recoverable value of inventories and thus formed additional inventory
allowances in the amount of 72,910 thousand SIT.
Adria Airways d.d. Annual Report 200478
B55.1.4 Operating receivables
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Long-term operating receivables 19,991 9,250
Long-term operating receivables due to other customers 19,991 9,250
Short-term operating receivables 3,369,331 2,983,867
Short-term operating receivables due from subsidiaries 32,738 545
Short-term trade receivables 2,902,847 2,829,136
Short-term interest receivables - 689
Other short-term operating receivables 536,754 240,659
Allowances for short-term operating receivables (103,008) (87,162)
Total operating receivables 3,389,322 2,993,117
• Short-term trade receivables (gross amounts) include trade receivables due from domestic and foreign customers, of which
due from foreign customers in the amount of 2,534,943 thousand SIT and from domestic customer in the amount of
367,904 thousand SIT. Trade receivables are regularly monitored. They are expressed in real terms and are collectible.
• Scheduled airline operators that are an associate member of IATA (International Air Transport Association) settle their
monthly receivables and liabilities accounts via the IATA Clearing House registered in Montreal. Every month, interline
transactions are settled by the ICH through the netting process. Receivables are not secured. Failure to comply with the
stipulated terms is considered a breach of contract with the airline operator and may result, in a later phase, in suspen-
sion from the institution. As at 31 December 2004, the balance of receivables for netting due from IATA amounts to
1,251,121 thousand SIT. The netting was carried out in January and February 2005.
• Adria Airways d.d. sells its air tickets through its agents in Slovenia and abroad. A similar monthly settlement of accounts
and a payment discipline that are implemented in connection with the airline operators are also used for the agents,
whose receivables are settled through the Bank Settlement Plan (BSP) and who are based in the country in which flight
tickets are sold.
• No operating receivables due from the members of the managing board, members of the supervisory board, employees
with special powers, and internal owners are recorded.
• Allowances for bad receivables are formed in compliance with criteria stated in the accounting policies. In 2004, addi-
tional allowances for short-term trade receivables were formed in the amount of 40,557 thousand SIT (excluding exchange
differences), written-off bad debts were recovered in the amount of 5,861 thousand SIT, and receivables in the amount of
18,176 thousand SIT were eliminated from the records. In 2004, receivables in the amount of 5,122 thousand SIT were
written off and charged directly against expenses associated with revaluation.
• Short-term trade receivables are mostly not secured. According to the ageing structure of short-term trade receivables as at
31 December 2003, 86.2% of receivables are not yet due and 13.8% receivables are due, of which most in a period up to
30 days.
• Other short-term operating receivables include paid short-term advances for aircraft and security deposits, receivables for
VAT refund, receivables due from sales points arising from ticket sales, and receivables due from suppliers for credit notes
that have been approved but not yet issued.
Adria Airways d.d. Annual Report 2004 79
B55.1.5 Short-term investments
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Short-term investments in debts (in Slovenia and abroad):
- due to banks 734,206 1,076,361
Short-term interest receivables 72 -
Short-term portion of long-term investments 345 400
Total 734,623 1,076,761
• Short-term investments include call deposits and time deposits up to one month in domestic and foreign banks, mostly in
euros and US dollars.
5.1.6 Cash in banks, cheques, and cash in hand
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Cash in hand and cheques received 8,657 15,862
Cash in banks 329,203 473,146
Total 337,860 489,008
5.1.7 Capital
(in thousand SIT) 31 Dec 2004 31 Dec 2003
I. Called-up capital 812,436 812,436
Share capital 812,436 812,436
II. Capital reserves 3,630,211 3,630,211
III. Revenue reserves 4,004,560 3,867,245
Statutory reserves 134,551 113,317
Other revenue reserves 3,870,009 3,753,928
IV. Profit or loss from previous periods 129,511 202,466
V. Net profit or loss for the period 21,234 53,344
VI. Equity revaluation adjustments 1,320,388 1,307,396
General equity revaluation adjustment 1,307,396 1,307,396
Specific equity revaluation adjustment 12,992 -
Total 9,918,340 9,873,098
• Called-up capital is composed of share capital, which is defined in the Articles and Memorandum of Association and
registered in the register of companies. It has been adequately subscribed and paid by the shareholders. Share capital
amounts to 812,436 thousand SIT and complies with the amount entered in the court register. It is divided into 406,218
ordinary shares at par value of 2,000 SIT that have been paid in total. All ordinary shares are of the same issue.
• All shares of the Company are of the same class. They have been issued in non-material form. The number of shares did
not change during the period.
• Own shares were not recorded either in the accounting period or in the previous periods.
• Book value of the share as at 31 December 2004 amounts to 24,416,30 SIT.
• Net profit per share amounts to 104,55 SIT.
• The shareholders’ meeting of the Company adopted at its 18th session a resolution on appropriation of accumulated
profit for 2003 in the amount of 255,809,696.00 SIT to:
Adria Airways d.d. Annual Report 200480
B5 - remuneration of the managing board in the amount of 3,546,930.00 SIT;
- remuneration of the supervisory board in the amount of 6,670,944.00 SIT;
- allocation to other reserves in the amount of 116,081,046.00 SIT;
- retained net profit from previous periods in the amount of 129,510,776.00 SIT.
• In 2005, the managing board adopted a resolution on appropriation of net profit for 2004 in the amount of
42,468,745.00 SIT to:
- statutory reserves in the amount of 21,234,372.50 SIT;
- accumulated profit in the amount of 21,234,372.50 SIT.
• The managing board and the supervisory board will propose to the shareholders’ meeting to adopt a resolution on appro-
priation of accumulated profit for 2004 in the amount of 150,745,148.40 SIT to:
- other reserves in the amount of 75,372,574.20 SIT;
- retained net profit from previous periods in the amount of 75,372,574.20 SIT.
• According to the Articles and Memorandum of Association, the following reserves are to be set up by the Company:
- Capital reserves were set up after ownership transformation of the Company and a capital increase. Capital reserves
are utilised under the terms and for the purpose defined in the law. Capitals reserves amount to 3,630,211 thousand
SIT. They did not change during the period.
- Revenue reserves include statutory reserves in the amount of 113,551 thousand SIT, which have been formed in the
amount equal to 50% of net profit for 2002, 2003, and 2004, in accordance with the provisions of the Articles and
Memorandum of Association. Other revenue reserves amount to 3,870,009 thousand SIT. In 2004, other reserves in-
creased by a portion of accumulated profit for 2003. Statutory reserves may be used for loss coverage, capital increase,
and investment in tangible fixed assets of the Company. Other revenue reserves may be used for any purpose in com-
pliance with the law, the Articles and Memorandum of Association, and the business policy of the Company.
• Net profit or loss from previous periods amounts to 129,511 thousand SIT and includes unappropriated net profit from
previous periods.
• Net profit or loss for the period represents 50% of realised net profit for 2004.
• General equity revaluation adjustment in the amount of 1,307,396 thousand SIT includes share capital revaluation adjust-
ment from previous periods.
• Specific equity revaluation adjustment in the amount of 12,992 thousand SIT includes revaluation adjustment referring
to tangible fixed assets.
5.1.8 Long-term financial and operating liabilities
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Long-term financial liabilities due to banks 4,219,630 5,096,502
Long-term financial and operating liabilities to other entities 5,392,890 6,530,224
Total 9,612,520 11,626,727
• A portion of long-term borrowings and liabilities under finance lease maturing in 2005 is recorded under short-term
financial and operating liabilities in the amount of 1,459,410 thousand SIT.
Long-term financial liabilities due to banks
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Long-term borrowings from domestic banks 2,733,971 3,131,024
Long-term borrowings from foreign banks 1,485,659 1,965,478
Total 4,219,630 5,096,502
Adria Airways d.d. Annual Report 2004 81
B5Long-term financial and operating liabilities to other entities
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Long-term borrowings from other foreign entities 5,385,988 6,515,080
Long-term operating liabilities under finance lease 1,836 1,785
Long-term operating liabilities to others 5,066 13,359
Total 5,392,890 6,530,224
• Long-term borrowings from other foreign entities include borrowing from the financial institution CRAFT Jersey.
• In 2004, no new long-term borrowings were raised.
• Long-term borrowings have been raised from a domestic bank, a foreign bank, and the financial institution CRAFT.
Long-term borrowings are denominated in USD (71%) and in EUR (29%).
• Long-term borrowings have been raised exclusively for funding of aircraft. Repayment period: twelve years.
• As a rule, principal and interest are repaid monthly.
• Long-term borrowings in the amount of 2,598,602 thousand SIT mature in a period in excess of five years. Long-term
financial liabilities are secured by lien on aircraft (refer to Note 5.1.10).
5.1.9 Short-term financial and operating liabilities
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Short-term liabilities due to banks 781,031 775,462
Payables for advances 50,410 117,878
Payables to suppliers 3,472,820 3,693,773
Short-term financial and operating liabilities to Group companies 17,836 -
Short-term financial and operating liabilities to other entities 1,595,847 1,384,698
Total 5,917,944 5,971,810
Short-term liabilities due to banks
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Short-term portion of borrowings from domestic banks 437,435 431,866
Short-term portion of borrowings from foreign banks 343,596 343,596
Total 781,031 775,462
• Short-term financial liabilities to banks include liabilities from long-term borrowings maturing in less than one year.
• Short-term financial liabilities are secured by lien on aircraft.
Payables to suppliers
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Payables to domestic suppliers 749,364 648,916
Payables to foreign suppliers 2,723,456 3,044,857
Total 3,472,820 3,693,773
• Payables to suppliers include payables for goods and services supplied in Slovenia and abroad. Payables to suppliers are
due within 8 to 60 days from the supply of goods, the provision of services, or the issue of an invoice.
Adria Airways d.d. Annual Report 200482
B5Short-term financial and operating liabilities to others
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Short-term portion of borrowings from financial institutes 677,544 609,612
Short-term operating liabilities to the state 173,135 119,752
Short-term operating liabilities to employees 480,254 375,717
Short-term portion of liabilities under finance lease 835 656
Other short-term operating liabilities 264,079 278,962
Total 1,595,847 1,384,699
• As at 31 December 2004, no operating liabilities due to the members of the managing board, the members of the supervi-
sory board, or the employees are recorded, except liabilities due to employees from wages and salaries for December 2004.
• Other short-term operating receivables mainly include liabilities under the court order issued to JAT Airways, Belgrade.
5.1.10 Off balance sheet items
(in thousand SIT) 2004 2003
Mortgages 20,513,424 20,702,149
Guarantees given 603,158 721,796
Other items 271,820 32,713
Total 21,388,402 21,456,658
• Off balance sheet items include mortgages (rights of lien) entered in land register in favour of domestic and foreign banks,
and foreign financial institutes to provide security for long-term borrowings for the purchase of aircraft.
• The amount of mortgages in original currency amounts to 83,666,262.00 US dollars and 20,526,764.82 euros and does
not change until the final repayment of borrowings.
• As at 31 December 2004, mortgage-secured borrowings amounted to 11,064,193 thousand SIT.
• The major portion of guarantees given refers to payment guarantees issued in favour of domestic and foreign suppliers of
services and goods.
5.2 Disclosures of items in the income statement
Cost items in terms of operating units
(in thousand SIT) 2004 2003
Production cost 25,775,206 22,984,724
Selling cost 4,030,910 3,657,829
General and administrative cost 1,037,049 885,070
Total 30,843,165 27,527,623
• Production cost of goods sold includes direct cost of services (airport and other services), cost of materials, labour cost,
depreciation expense, and production overhead.
• Selling cost includes marketing cost, cost of company-operated sales in Slovenia and abroad, cost of agent-operated sales
in Slovenia and abroad (commission – other selling cost).
• General and administrative cost includes cost of administrative work for the entire Company.
Adria Airways d.d. Annual Report 2004 83
B5Cost items in terms of type are shown below.
5.2.1 Net sales
Net sales by business segment
(in thousand SIT) 2004 2003
* Scheduled air traffic – passengers 24,604,747 22,862,300
* Scheduled air traffic – freight 911,504 1,106,195
* Non-scheduled air traffic (charter) – passengers 2,766,904 2,226,618
* Aircraft servicing for third parties 2,486,151 1,218,066
* Other 874,612 960,347
Total 31,643,918 28,373,526
• The object of the Company includes activities related to providing international air transport of passengers; revenue from
sale of these services represents 86.5% of total sales revenue.
• Aircraft servicing for third parties has increased in importance and represents 7.9% of total sales revenue, and sales rev-
enues from transport of freight represent 2.9% of total sales revenue.
Net sales revenue from sale in Slovenia and abroad
(in thousand SIT) 2004 2003
Net sales in Slovenia 358,146 264,052
Net sales abroad 31,285,772 28,109,474
Total 31,643,918 28,373,526
5.2.2 Cost of goods, materials, and services
(in thousand SIT) 2004 2003
Cost of goods sold 19,551 189,355
Cost of materials 5,913,147 4,519,015
Cost of services 14,775,884 13,637,258
Total 20,708,582 18,345,628
• Cost of goods, materials and services increased in 2004 by 13% over the previous year’s figure. The increase was due to
an increase in the volume of air transport and an increase in the volume of aircraft servicing for third parties.
Cost of materials
(in thousand SIT) 2004 2003
Aircraft fuel 3,864,031 2,886,555
Goods and materials for passenger catering 667,702 785,594
Spare parts for aircraft maintenance 959,105 432,635
Other cost of materials 422,309 414,231
Total 5,913,147 4,519,015
Adria Airways d.d. Annual Report 200484
B5Cost of services
(in thousand SIT) 2004 2003
Cost of airport services 5,504,401 5,244,950
Cost of navigation 1,957,418 1,832,820
Cost of maintenance 2,168,694 2,030,024
Cost of rentals 2,084,682 1,499,111
Cost of banking services and cost of insurance 293,109 500,299
Refund of cost 320,594 291,958
Cost of transport services 412,421 383,697
Other cost of services 2,034,565 1,854,399
Total 14,775,884 13,637,258
Other cost of services includes cost of training, cost of cargo, cost of student service, air passenger tax, and cost of profes-
sional services.
5.2.3 Labour cost
(in thousand SIT) 2004 2003
Wages and salaries, continued pay 4,234,232 3,594,688
Social security cost 698,204 586,551
Pension insurance cost 261,439 214,041
Other labour cost 1,260,677 1,050,407
Total 6,454,552 5,445,687
• In 2004, other labour cost included vacation bonuses, commuting allowances, meal allowances, termination pays, anni-
versary bonuses, payroll tax, and emoluments paid to some employees working in the representative offices abroad.
5.2.4 Amortisation and depreciation expense
Amortisation/Depreciation
(in thousand SIT) 2004 2003
Amortisation of intangible fixed assets,
depreciation of tangible fixed assets 1,869,889 2,073,972
Operating expenses from revaluation of intangible fixed assets
and tangible fixed assets 132,254 10,037
Total 1,902,143 2,084,009
Operating expenses from revaluation of operating current assets
• Operating expenses from revaluation of operating current assets include allowances for inventories in the amount of
72,910 thousand SIT, allowances for bad receivables in the amount of 40,557 thousand SIT, writedown of receivables in
the amount of 5,122 thousand SIT (exclusive of exchange gains and losses), and writedown of liabilities in the amount of
56,430 thousand SIT.
Adria Airways d.d. Annual Report 2004 85
B55.2.5 Financial revenues
(in thousand SIT) 2004 2003
Financial revenues from shares 9,113 30,919
- financial revenue from interests in Group companies 6,913 28,486
- other financial revenues from shares 2,200 2,433
Financial revenues from long-term receivables 638 461
- other financial revenues from long-term receivables 638 461
Financial revenues from short-term receivables 821,201 1,232,273
- financial revenues from short-term receivables due from Group companies 1,742 519
- other financial revenues from short-term receivables 819,459 1,231,754
Total 830,952 1,263,653
• Financial revenues include interest revenue and exchange gains.
• Other financial revenues from short-term receivables include interest revenue in the amount of 23,919 thousand SIT and
exchange gains in the amount of 779,050 thousand SIT arising from translation into local currency, and other financial
revenues in the amount of (16,490 thousand SIT).
5.2.6 Financial expenses
(in thousand SIT) 2004 2003
Financial expenses for long- and short-term investment write-offs - 1
- Financial expenses for revaluation of other investments - 1
Interest expenses and expenses from other liabilities 1,568,088 2,066,041
- to Group companies 3,687 1,441
- to associated companies 2 -
- other interest expenses and financial expenses associated with other liabilities 1,564,399 2,064,600
Total 1,568,088 2,066,041
• Financial expenses include interest expenses associated with long-term borrowings in the amount of 802,506 thousand
SIT and exchange losses in the amount of 761,893 thousand SIT.
5.2.7 Income tax
• Income is taxed at 25%. The tax base was determined by taking into account tax additions and tax deductions. Income
tax amounts to 56.5% of total profit.
• The high effective tax rate is mainly due to the refund of labour-related expenses and other cost to employees which
exceeded the ‘Decree on the level of reimbursement of work-related expenses and other expenses not included in the tax
base’ and represent a final tax assessment from refund of commuting allowances for 2003 and 2004.
Adria Airways d.d. Annual Report 200486
B55.2.8 Net profit or loss for the period
(in thousand SIT) 2004 2003
Profit or loss from ordinary activities 169,394 105,597
Profit or loss from extraordinary activities (71,703) 29,691
Net profit or loss for the period 42,468 106,688
• In 2004, operating profit amounted to 906,530 thousand SIT, remaining in line with the previous year’s figure.
• Financial results showed a loss in the amount of 737,136 thousand SIT, mainly due to high funding cost for aircraft.
• This had an impact on profit and loss for the period that amounted to 42,468 thousand SIT and showed a decrease of
60% over the previous year’s figure.
General revaluation in order to maintain the purchasing power of capital
(in thousand SIT) Change in the euro exchange rate Cost-of-living index
Change in % 1.289 3.2
General revaluation adjustment 127,132 315,612
Profit or loss for the period after revaluation of capital in order tomaintain its purchasing power
(84,664) (273,144)
• If capital had been revalued by the growth rate of the euro exchange rate, profit or loss for the period would have been
lower by 127,132 thousand SIT in 2004. If capital had been revalued by the cost of living index, profit or loss for the
period would have been lower by 315,612 thousand SIT.
Adria Airways d.d. Annual Report 2004 87
B66. Other disclosures
6.1 Information on groups of persons
In 2004, the emoluments paid to the groups of persons in accordance with Article 253, Companies Act, amounted to:
(in thousand SIT) 2004
Members of the Management Board 37,077
Members of the Supervisory Board 9,351
- external – representatives of capital 6,379
- internal – representatives of employees 2,972
Persons employed under individual employment agreements 292,475
Total 338,903
All amounts are quoted gross and do not include employer’s contributions.
• The emoluments of the members of the management board include: salaries, fringe benefits, vacation bonus, other emolu-
ments, profit share in accordance with the resolution adopted by the shareholder’s meeting, and refund of expenses. The
emoluments of persons employed under individual employment agreements, to which the collective agreement does not
apply, include salaries, fringe benefits, vacation bonus, refund of expenses, and other emoluments (anniversary bonus,
termination pay, etc.). The emoluments of the members of the supervisory board include meeting attendance fees, travel
expenses, and profit share in accordance with the resolution adopted by the shareholder’s meeting.
6.2 Financial ratios
2004 2003
Equity financing rate 38.69% 35.70%
Long-term financing rate 76.21% 77.77%
Operating fixed assets rate 77.77% 79.70%
Long-term investment rate 78.85% 80.73%
Equity to operating fixed assets 0.50 0.45
Acid test ratio 0.18 0.25
Quick ratio 0.77 0.75
Current ratio 0.89 0.87
Operating efficiency ratio 1.03 1.03
Net return on equity ratio 0.43% 1.12%
Explanation of ratios
• Equity financing rate is equity to liabilities (in broader sense) ratio. It shows the share of equity financing in a company’s
assets. In 2004, equity financing rate showed an increase of 3 percentage points over 2003. An increase in equity finan-
cing rate is due to a decrease in long-term indebtedness and an increase in financial strength and stability of the Compa-
ny.
• Long-term financing rate is total capital (capital, provisions, long-term financial and operating liabilities) to liabilities (in
Adria Airways d.d. Annual Report 200488
B6broader sense) ratio. In 2004, long-term financing rate amounted to 76.21%, which shows a high degree of long-term so-
urces of financing in the Company’s sources of financing.
• Operating fixed assets rate is operating fixed assets (intangible and tangible fixed assets) to assets ratio. In 2004, tangi-
ble fixed assets represented a 77.77% share in total assets. The Company operates in a line of business (air transport),
in which high investments in tangible fixed assets are required. In 2004, the operating fixed assets rate decreased by 2
percentage points over 2003. A drop in the ratio figure is due to a decrease in the value of tangible fixed assets owing to
writedowns and a decrease in the value of aircraft due to a drop in the USD exchange rate.
• Long-term investment rate is long-term assets to assets ratio. In 2004, long-term assets rate amounted to 78.85 percentage
points and showed a modest downward trend of the share of long-term assets in total assets.
• Equity to operating fixed assets is equity to operating fixed assets (intangible and tangible fixed assets) ratio. It shows the
coverage of operating fixed assets by equity. In 2004, the ratio showed an increase of the previous year’s figure, mainly
due to a decrease in the value of assets.
• Acid test ratio, quick ratio, and current ratio are the measures of solvency of a company. Current ratio is an index compu-
ted as total current assets, including the deferred costs (expenses) and accrued revenues, to total current liabilities, inclu-
ding accrued costs (expenses) and deferred revenues. Quick ratio and acid test ratio are calculated by deducting invento-
ries from current assets and deferred costs (expenses) and accrued revenues (acid test ratio), or by deducting inventories,
operating receivables, and short-term investments from current assets (quick ratio). It is evident from the table that the
value of quick ratio and current ratio slightly improved in 2004 over 2003. The value of current ratio is about 1, meaning
that the Company is capable of promptly meeting its obligations.
• Operating efficiency ratio is operating revenues to operating expenses ratio. In 2004, the value of the ratio remained the
same as in 2003. It indicates positive results from the Company’s principal activities.
• Net return on equity ratio is net profit for the period to average equity (excluding net profit for the period) ratio. Due to a
lower net profit or loss for 2004, net return on equity was slightly lower in 2004 over 2003.
Adria Airways d.d. Annual Report 2004 89
B77. Financial statements – expanded form
7.1 Balance sheet – expanded form under SAS
(in thousand SIT) 31 Dec 2004 31 Dec 2003
Assets 25,633,650 27,651,999
A Fixed assets 20,192,753 22,314,656
I. Intangible fixed assets 36,176 39,751
1. Deferred operating cost 36,176 39,751
II. Tangible fixed assets 19,899,668 21,999,543
1. Land and buildings 1,374,344 1,420,803
a) Land 166,343 166,343
b) Buildings 1,208,001 1,254,460
2. Production plant and equipment 18,116,822 20,335,668
3. Other plant and equipment 212,084 222,530
4. Tangible fixed assets being acquired 196,418 20,542
a) Advances for tangible fixed assets 100,239 -
b) Tangible fixed assets in course of construction 96,179 20,542
III. Long-term investments 256,909 275,362
1. Interests in Group companies 233,523 250,131
5. Other long-term shares 21,086 22,581
6. Other long-term receivables from investments 2,300 2,650
B Current assets 5,220,880 5,251,854
I. Inventories 759,075 692,968
1. Materials 759,075 692,968
II. Operating receivables 3,389,322 2,993,117
a) Long-term operating receivables 19,991 9,250
4. Long-term receivables due from other entities 19,991 9,250
b) Short-term operating receivables 3,369,331 2,983,867
1. Short-term trade receivables 2,799,839 2,746,676
2. Short-term receivables due from Group companies,
excluding associates 32,738 545
4. Short-term receivables due from other entities 536,754 236,646
III. Short-term investments 734,623 1,076,761
4. Short-term investments in other entities 734,623 1,076,761
IV. Cash in banks, cheques, cash in hand 337,860 489,008
Adria Airways d.d. Annual Report 200490
B7 31 Dec 2004 31 Dec 2003
C Deferred costs (expenses) and accrued revenues 220,017 85,489
Off balance sheet items 21,388,402 21,456,658
Liabilities 25,633,650 27,651,999
A Capital 9,918,340 9,873,098
I. Called-up capital 812,436 812,436
1. Share capital 812,436 812,436
II. Capital reserves 3,630,211 3,630,211
III. Revenue reserves 4,004,560 3,867,245
3. Statutory reserves 134,551 113,317
4. Other revenue reserves 3,870,009 3,753,928
IV. Net profit or loss from previous periods 129,511 202,466
V. Net profit or loss for the period 21,234 53,344
VI. Capital revaluation adjustments 1,320,388 1,307,396
1. General equity revaluation adjustments 1,307,396 1,307,396
2. Specific equity revaluation adjustments 12,992 -
B Provisions 4,962 4,782
3. Other provisions 4,962 4,782
C Financial and operating liabilities 15,530,464 17,598,537
a) Long-term financial and operating liabilities 9,612,520 11,626,727
2. Long-term financial liabilities to banks 4,219,630 5,096,502
8. Long-term financial and operating liabilities to other entities 5,392,890 6,530,224
b) Short-term financial and operating liabilities 5,917,944 5,971,810
2. Short-term financial liabilities to banks 781,031 775,462
3. Short-term operating liabilities from advances 50,410 117,878
4. Short-term trade payables 3,472,820 3,693,773
6. Short-term financial and operating liabilities (including bonds) to Group companies, excluding associates
17,836 -
8. Short-term financial and operating liabilities to other entities 1,595,847 1,384,698
D Accrued costs (expenses) and deferred revenues 179,884 175,582
Off balance sheet items 21,388,402 21,456,658
Adria Airways d.d. Annual Report 2004 91
B77.2 Income statement – expanded form under SAS
(in thousand SIT) 2004 2003
1. Net sales 31,643,918 28,373,526
2. Production cost of goods sold (including depreciation and amortisation) and/or cost of goods sold
(25,775,206) (22,984,724)
3. Gross profit or loss (1–2) 5,868,712 5,388,802
4. Selling cost (including amortisation and depreciation expense) (4,030,910) (3,657,829)
5. General and administration expense (including amortisation and depreciation expense) (1,037,049) (885,070)
a) Estimated general and administrative expense (887,956) (766,676)
b) Operating expenses from revaluation of intangible and tangible fixed assets (32,254) (10,037)
c) Operating expenses from revaluation of operating current assets (116,839) (108,357)
6. Other operating revenues (including operating revenues from revaluation) 105,777 62,083
7. Financial revenue from shares 9,113 30,919
a) Financial revenue from interests in Group companies, excluding associates 6,913 28,486
c) Other financial revenue from shares (including operating revenues from revaluation) 2,200 2,433
8. Financial revenue from long-term receivables 638 461
c) Other financial revenue from long-term receivables (including financial revenue from revaluation) 638 461
9. Financial revenue from short-term receivables 821,201 1,232,273
a) Interest revenue and financial revenue from short-term receivables due from Group companies, excluding associates
1,742 519
c) Other interest revenue and financial revenue from short-term receivables (including financial revenue from revaluation)
819,459 1,231,754
10. Financial expenses for long-term and short-term investment write-offs - (1)
c) Financial expenses from revaluation of other investments - (1)
11. Interest expenses and financial expenses for other liabilities (1,568,088) (2,066,041)
a) Interest expenses and financial expenses for other liabilities to Group companies, excluding associates
(3,687) (1,441)
b) Interest expenses and financial expenses for other liabilities to associates (2) -
c) Other interest expenses and financial expenses for other liabilities (1,564,399) (2,064,600)
13. Net profit or loss from ordinary activities 169,394 105,597
14. Extraordinary revenues 14,778 95,493
15. Extraordinary expenses (86,481) (65,802)
a) Extraordinary expenses less expenses for equity revaluation adjustment (86,481) (65,802)
16. Extraordinary profit or loss (14–15) (71,703) 29,691
17. Income tax from extraordinary activities (55,223) (28,600)
19. Net profit or loss for the period 42,468 106,688
Adria Airways d.d. Annual Report 200492
B
Adria Airways d.d. Annual Report 2004 93
3rd part
Auditor's Report
C
Adria Airways d.d. Annual Report 200494
C
Adria Airways d.d. Annual Report 2004 95
C
Production:
Adria Airways,
Slovenski letalski prevoznik d.d.
Design:
LUKS Studio
Photos:
Matevž Lenarčič,
Archive Adria Airways
Translated by:
KPMG Slovenija d.o.o.
Printed by:
TKBM
June 2005