€35m hike in airport fees to impact cuts at Aer Lingus
MORE than a third of the cost cuts secured under Aer Lingus's contentious 'Greenfield' project will be wiped out by an imminent €35m hike in airport charges, the airline admitted yesterday.
The revelation came on a morning conference call, as senior Aer Lingus executives talked analysts and investors through a largely positive interim management statement (IMS).
On the call, Aer Lingus finance boss Andrew McParland said 2011's airport charges "could be €35m higher than this year", citing rising prices at key airports like London's Heathrow.
"[It's] a significant headwind," he said, adding that it would account for "about a third" of the €97m in cost savings that Aer Lingus is targeting through Greenfield.
Charges at Heathrow will rise by about 12.5pc next year, while Dublin Airport's fees will rise by 33pc between 2010 and 2015 -- the two airports account for well over half of Aer Lingus's flights.
"They've certainly flagged that airport charges were going up, but we didn't have the €35m number," said Davy's analyst Stephen Furlong, who described the issue as the "biggest negative" from yesterday's data.
A spokesman for Aer Lingus said that while the airline was "ultimately opposed" to higher airport charges there were no plans to move away from Heathrow and Dublin.
"What we're trying to do is broaden our revenue base -- instead of just carrying passengers between Ireland and the US, we're now doing Europe to the US," he added.
Meanwhile, Bloxham's aviation analyst Joe Gill said the airline "can handle" next year's €35m increase -- "but if there's another hike in 2012 it gets tougher".
Aer Lingus has spent the best part of a year fighting to implement the Greenfield plan, and is still at loggerheads with cabin crew, who are working to rule, and pilots, who've voted for industrial action.
On the trading front, Aer Lingus notched up operating profits of €79.2m in the seasonally strong third quarter, a 35pc improvement on 2009's third quarter result.
The higher profits came as revenue rose 5.5pc to €411.7m, while operating costs were largely unchanged after a 20pc fall in staff costs wiped out rises elsewhere.
Aer Lingus boss Christoph Mueller described the performance as a "very significant improvement" on 2009, and said the airline was still confident of reaching the "top end" of analysts' profit forecasts.
"We remain cautious on the outlook for 2011," Mr Mueller added, pointing to the "continuing economic uncertainty" in the airline's primary markets of the UK and Ireland.
Analysts were broadly positive on the results, with Bloxham's Mr Gill concluding that Aer Lingus was "out of the repair shop and functioning properly again".