Sunday 28 May 2017

IAG to 'intensively' grow Aer Lingus as profits soar

Kavanagh hails 'positive year' as carrier posts record €233m

Aer Lingus ceo Stephen Kavanagh said it had been trading well and had successfully restructured Photo: Mark Condren
Aer Lingus ceo Stephen Kavanagh said it had been trading well and had successfully restructured Photo: Mark Condren
John Mulligan

John Mulligan

Aer Lingus has become IAG's "most profitable tool" in terms of its return on invested capital, and the airline group will be growing the carrier "intensively", according to IAG's chief financial officer, Enrique Dupuy.

He made the comments yesterday as IAG said that Aer Lingus made a record €233m operating profit last year, €109m more than in 2015.

The increase was helped by lower fuel costs and stable employee costs despite growth.

"There's a very important growth story behind Aer Lingus," said Mr Dupuy. "That has to do with Aer Lingus being today probably our most profitable tool in terms of growing. We need, and we want to exploit it."

Capacity at Aer Lingus will grow 11.8pc this year, according to IAG, which made a €2.5bn operating profit last year, but took a €460m hit on currency fluctuations.

The group's shares rose as it announced a €500m share buyback programme.

The full-year figures showed that Aer Lingus continues to generate, by a significant margin, the highest return in invested capital (ROIC) for the group, which also includes British Airways, Iberia and Vueling.

The ROIC figure at Aer Lingus last year was 23.1pc, versus a group figure of 13.6pc.

"We need to get them (Aer Lingus) to their efficiency limit," said Mr Dupuy. "And they have a lot of opportunities that we want to exploit."

He added that Aer Lingus has a "very lean asset base" and that when IAG bought Aer Lingus in 2015 for €1.34bn the airline was "in a very efficient condition".

Aer Lingus ceo Stephen Kavanagh said the airline has been trading well and had a "very positive year in terms of restructuring the business in terms of cost", which has allowed it to price competitively and improve margins. He also said the airline is considering the introduction of a seat-only fare for price-sensitive customers on its transatlantic services.

IAG chief executive Willie Walsh said that had "no concern" regarding Brexit.

"There's a long way to go yet," he said of the process for the UK to leave the EU. "The interests of consumers are best served by continuing to have a liberalised, deregulated environment in Europe from an aviation point of view."

He said fallback position under World Trade Organisation rules would be bilateral air service agreements.

"It's in the interests of everybody in Europe, and consumers generally, that the environment that favours consumers today will continue to favour consumers going forward," said Mr Walsh.

Despite the rapid growth of Aer Lingus, particularly at Dublin, and the growth of Dublin as a hub for traffic between Europe and the United States, Mr Walsh said there is "no way" a business-only service from the capital would work on the transatlantic network and said such a move would be a "financial disaster".

Irish Independent

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