Aer Lingus shares hit by warning over profits
SHARES in Aer Lingus tumbled by more than 12pc at one point yesterday after it reined in profit expectations for the current financial year and warned that leisure travel from the UK to Ireland has been severely curtailed.
The airline expects to generate pre-exceptional operating profits of around €60m this year – 13pc lower than the €69.1m it had pencilled in.
The hot summer weather at home this year had dampened demand from Ireland to such an extent that the airline said that it would not recoup lost passenger volumes by the end of the year.
Its warning comes a week after Ryanair told investors that its full-year profit would also be lower than expected.
Aer Lingus said that despite more aggressive ticket pricing, it wouldn't be possible to recover lost passenger volumes.
It also cautioned that the pricing environment had become "intensely competitive" and that this would adversely impact what are traditionally higher cost fares for travellers booking flights in the same month they intend to fly.
That increased competition is a direct result of Ryanair taking steps to slash some prices, especially on routes where it has competition, as it aims to fill planes this winter.
Chief executive Christoph Mueller acknowledged that Aer Lingus was feeling the impact of those price cuts.
"All markets are more or less normal but for the UK.
"In the UK, we have seen for quite some time the reduced private activity with regard to outbound travel," he said.
Aer Lingus chief commercial officer Stephen Kavanagh told investors yesterday that the airline planned to cut its winter capacity by at least 3pc.
But unlike Ryanair, which will ground between 70 and 80 aircraft this winter, Aer Lingus will scale back the number of available seats through so-called "tactical cancellations" on routes with high flight frequencies.
Mr Mueller confirmed that the airline was continuing to examine cost-reduction opportunities in order to preserve competitiveness and protect future profitability.
"We have just restructured our catering facility and there are more distinct projects in the pipeline," he said.
A voluntary redundancy scheme that aimed to cut 100 full-time equivalent posts had received more than 300 applications.
However, the process had stalled due to a massive deficit issue at a pension scheme that serves thousands of current and former Aer Lingus and DAA workers and which hasn't yet been resolved by trustees and the Pensions Board.