IAG 'more ambitious now' for Aer Lingus growth says Willie Walsh
Published 30/07/2016 | 02:30
IAG is more ambitious about growth at Aer Lingus now than it was when it bought it a year ago, chief executive Willie Walsh has told the Irish Independent.
He was speaking yesterday after IAG reported second quarter and first half results, which showed that operating profits at Aer Lingus in the first six months of the year soared from €4m to €42m. Revenue at Aer Lingus rose 2.8pc to €787m in the period.
IAG chief financial officer Enrique Dupuy described Aer Lingus as the "star" of the airline group.
Mr Dupuy told the Irish Independent yesterday that the airline's performance will further improve as it benefits from additional and deeper cost synergies and purchasing strengths by being part of IAG.
"There's so much to be done still," he said. "In terms of synergies, we're just reaping the low-hanging fruit. There's huge potential to be developed in the next two to three years. On the cost side, Aer Lingus is starting to benefit from the IAG fleet contracts, and the IAG maintenance contracts. You cannot imagine the opportunities in terms of cost savings and capex reductions that they are achieving."
IAG acquired Aer Lingus last year for €1.36bn.
Since then, the Irish carrier has expanded its network to North America, and will announce further routes and capacity to the region in the autumn. Two new A330s are being added to its fleet next year.
IAG's results also showed that Aer Lingus has generated a return on invested capital (ROIC), of 16pc over the past four quarter. That's the highest of any airline in the IAG stable, which also includes British Airways, Iberia and Vueling.
Mr Dupuy said key challenge for Aer Lingus will be to maintain that ROIC performance as it receives new aircraft.
Mr Walsh said that Aer Lingus management are continuing to evaluate the possibility of introducing the A321 LR aircraft to the fleet when it begins to roll off the production line.
Mr Walsh has previously said the long-range, narrowbody aircraft could be used to fly from Cork to the US, for instance. But its introduction would also serve to strengthen Dublin's position as a transatlantic hub, he said.
"We think the (A321 LR) is particularly interesting for Aer Lingus on the transatlantic," said Mr Walsh. "It will allow Aer Lingus to operate double frequencies on flights.
"So instead of having one A330, you could have two A321s. The advantage of that is that it makes the (Dublin) hub much stronger. It gives additional flexibility for people to connect from Dublin. That's particularly attractive."
Mr Walsh also said that while weaker sterling as a result of the Brexit vote impacts on UK sales, it has makes UK more attractive from the US point of sale. Increased traffic, he said, could flow through Dublin.
He said that Aer Lingus has a short sterling position, which is a negative, but a long dollar position, which is positive.
"The dollar more than offsets the sterling position. That's why we see it as an opportunity for Aer Lingus," he said.
IAG said the group made a €555m operating profit in the second quarter, with volatile foreign exchange swings knocking €148m off the number. The group also cut its full-year profit forecasts.