Aer Lingus expects 2011 to be profitable

Sept. 2, 2011
3 min read

The airline attributed industrial action by staff at the start of the year for its operating loss of EUR 27.8 million for the first half of 2011 compared to the EUR 19m loss recorded over the same period in 2010.

Aer Lingus shares closed up 9.3% at 64.50 cents on the prospect of a profitable year.

Chief executive of Aer Lingus, Christoph Muller, said the figures represented "a tale of two quarters" as the airline recorded a surge in business between April and June.

As a result, Aer Lingus expressed a more upbeat forecast on its profitability for the full year than initially expected at the start of 2011.

"We expect revenue growth in the second half to be broadly similar to that of the first six months," said Mr Muller who denied speculation he was in line to fill a vacancy with Air Berlin.

He said trading conditions remained difficult with jet fuel spot prices up 22% since January and airport charges increasing by 9% on average and by up to 40% at Dublin and Heathrow.

While Mr Muller pointed out that the company had an operating profit of EUR 25.9m for the second quarter, he stressed the impact of the industrial action by cabin crew, which cost the airline an estimated EUR 50m.

He claimed Q1 had also been affected by a reduction in the airline's capacity at Gatwick as well as the absence of long-haul flights out of Shannon.

In contrast, Aer Lingus recorded growth in the second quarter from a number of factors including a late Easter and no ash cloud disruption which had hit the airline in the same period last year.

Staff costs fell by 6% for the first six months, while fuel costs also decreased by 2%, despite a general rise in oil prices.

Aer Lingus said it was on target to achieve savings of EUR 80m by the end of the year through its ongoing cost-cutting programme. Mr Muller said the airline was asking staff to consider more seasonal working on a voluntary basis in order to achieve its overall target of EUR 97m in savings from its Greenfield programme.

"Seasonality is now the big challenge" he said.

Although passenger numbers in the first half of 2011 were down 1% to just over 4.3m, revenue increased by almost 6% to EUR 569.1m. Average yield per passenger rose by 8.4% to almost EUR 107.

Aer Lingus said a majority of bookings now came from outside Ireland with foreign nationals accounting for 55% of all seat reservations, a sign of ongoing weakness in the Irish market. However, the airline's balance sheet remains strong with cash reserves of EUR 919.4m at the end of June.

"We are profitable and generating cash but our share price is undervalued," stated Mr Muller.

He said Aer Lingus would remain outside the main airline alliances for present as the cost of joining would outweigh any benefits.

He also ruled out any return by Aer Lingus to the Dublin-Cork route following the recent decision by Ryanair to withdraw its services. Aer Lingus said it was satisfied that Cork passengers had good connectivity from the six aircraft based at Cork which operate 20 routes.

Mr Muller expressed satisfaction that Aer Lingus was attracting substantial transatlantic connecting passengers from cities like Paris and Rome.

However, he refused to comment on the contents of a report into a EUR 30.2m settlement Aer Lingus was forced to reach with the Revenue over its controversial rehiring of staff who had availed of a redundancy scheme in 2009.

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