Tuesday 27 September 2016

‘Cost base efficient but there’s always room for improvement’

Published 28/05/2015 | 02:30

Mr Walsh said Aer Lingus is a
Mr Walsh said Aer Lingus is a "well-run airline" and that its cost base is efficient

IAG chief executive Willie Walsh has insisted that the Aer Lingus cost base is efficient but that there's "always scope for improvement" at airlines.

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But he also expects IAG to make a substantial investment in Aer Lingus in coming years - probably well over €1bn - in order to achieve ambitious growth targets, including the creation of up to 635 net new jobs.

Much of that investment will be down to basing additional long-haul aircraft in Ireland.

IAG plans to base up to eight more such aircraft here as part of its Aer Lingus takeover plan.

Mr Walsh pointed out that each long-haul aircraft it would base in Ireland has a list price of between $220m and $280m (€202m to €257m).

"We're talking about significant capital expenditure to support the expansion of the airline," said Mr Walsh.

The IAG chief executive said that existing Aer Lingus management, including CEO Stephen Kavanagh, have been effective at controlling costs.

"I think, to give them credit, they've done an excellent job at turning the airline around in the face of very significant economic challenges.

"They face probably the most aggressive competitor in the airline industry on their doorstep in the form of Ryanair.

Profitable

"So to be able to compete effectively and to be profitable, you have to be efficient, but there's always scope for improvement. Technology gives us new opportunities."

Last year, IAG targeted €600m in synergies across the group and achieved €633m.

Mr Walsh said Aer Lingus is a "well-run airline" and that its cost base is efficient.

When recently departed Aer Lingus chief executive Christoph Mueller joined the airline in 2009, he set about slashing costs at the carrier.

A cost-reduction programme was introduced by him in 2009 and ran to 2013. It cut well over €100m a year from costs.

A new cost-saving programme was introduced in 2014. It aims to cut another €40m from costs this year.

Figures compiled by the Irish Independent show that the 3,766 full-time equivalent employees at Aer Lingus earned on average €67,180 each last year. However, that figure is somewhat skewed, by higher wages paid to pilots, for instance.

While IAG will be able to utilise synergies at Aer Lingus if it buys it, Mr Walsh declined to provide any details to financial analysts during a conference call. He has said that Aer Lingus will be able to avail of aircraft that IAG currently has on order to boost its long-haul services.

Irish Independent

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