Monday 20 November 2017

Aer Lingus profits to fuel debate on €1.4bn sale

Aer lingus will release its financial results for 2014 next week
Aer lingus will release its financial results for 2014 next week
John Mulligan

John Mulligan

Next week will provide more ammunition for both camps in the battle for the future of Aer Lingus as the airline releases financial results for 2014.

Aer Lingus will publish the results on Tuesday and executives will also host a presentation for investors in London that day to provide more detail about its strategy.

Minister for Agriculture and Defence Simon Coveney yesterday said the current €1.36bn offer from IAG to buy Aer Lingus is "not persuasive enough".

While a number of TDs are now coming around to the idea of the Government selling its 25.1pc stake in Aer Lingus, the Labour Party remains entrenched in its opposition to a deal.

Aer Lingus predicted late last year that despite industrial action early in 2014 that dented bookings at the time, it was still on track to generate more than the €61.1m in operating profits it made in 2013.

An increase in profits will undoubtedly fuel the argument that it can survive and compete as an independent airline.

David Holohan, head of research at Merrion Capital, predicts that the airline will report an operating profit of €75m for 2014, a figure he expects to rise to around €90m this year.

But he stressed that the profit margin remains small given the roughly €1.5bn in revenue the airline generates.

"It's not enormously profitable," said Mr Holohan. "For them, any small exceptional items, such as replacing an engine for instance, can have a significant impact on their bottom line."

He said that long-haul will provide a big chunk of the profits, but that short-haul services remain "challenging".

Short-haul operations are being squeezed as Ryanair encroaches on territory that was traditionally the preserve of Aer Lingus - primary mainland European airports. Ryanair is also launching more services from Dublin that will cannibalise Aer Lingus traffic.

Mr Coveney said there are "mixed views" within Fine Gael, "but there's a process under way", adding: "our primary concern is not the monetary value of shares, but the public interest."

He told Newstalk radio said that regional connectivity was paramount. "As of yet, we don't have an offer which is persuasive enough," he said.

Irish Independent

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