Sunday 18 February 2018

Aer Lingus is upbeat despite €81m loss and uncertainty

Laura Noonan

AER Lingus beat its internal targets for the past three months, but is still unable to give full-year earnings guidance amid continued "uncertainty" over bookings later in the year.

The commentary came yesterday as the flag carrier presented its 2009 results. The top-line figures were released two weeks ago, but the company delayed its presentation until all the unions signed up to a crucial cost-cutting deal.

Yesterday's announcement confirmed a quadrupling of operating losses to €81m for 2009, as the national carrier grappled with "tough markets" in Ireland, the UK and the US.

Airline chief executive Christoph Mueller hinted at a better start to 2010, commenting that trading so far this year was beating both 2009's numbers and the airline's own financial projections.

The 2010 year will also benefit from €40m worth of savings under the 'Project Greenfield' cost-cutting, as well as lower fuel costs since 75pc of this year's requirement has already been hedged.

Despite those positives, Mueller repeatedly stressed the "uncertain" outlook for the rest of 2010, pointing out that the airline has "almost no visibility" on bookings for the second half of the year.

That lack of visibility means that Aer Lingus has not yet finalised its winter schedule, and Mr Mueller yesterday hinted at significant curtailments as Aer Lingus continues to be "demand led".

"We at Aer Lingus have to learn to manage seasonality better," Mr Mueller added, stressing that most airlines curbed their schedules by between 5pc and 10pc in "normal times".

Long haul was the poorest performer in 2009, with passenger revenue falling by more than 20pc to €275m, as Aer Lingus axed West Coast routes and failed to attract sufficient revenue to its remaining East Coast services.

Aer Lingus planning director Stephen Kavanagh said the airline was confident it could get long haul back to profit "in time". Mr Mueller said "we won't need years" when asked how long the process would take.

The other loss-leader was Aer Lingus's fledgling Gatwick base, which was pared back from five aircraft to three.

Despite an "unacceptable" performance to date, Mr Mueller said there was "no question" of Aer Lingus withdrawing completely from the London base.

Higher charges

The 2010 result would also be impacted by higher charges at Dublin Airport, which Mr Mueller said could add anything between €20m and €35m to Aer Lingus's cost line depending on passenger numbers.

The Government's €10 aviation tax is another potential drag on this year's figures, and Mr Mueller repeated calls for his 25pc shareholder to rescind a tax that could "wipe out our bottom line".

Bloxham's analyst Joe Gill said Aer Lingus's commentary provided "some promise of stability within the business", while Goodbody's Eamonn Hughes said he took "reassurance" from both the results and guidance.

The stock spent the day in positive territory, rising as much as 7pc at the peak.

Irish Independent

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