Aer Lingus: ‘No profit until 2011’

By Niamh Hennessy

Wednesday, March 10, 2010

AER LINGUS may not return to profitability until 2011 after announcing that operating losses had quadrupled last year.

The airline’s share price closed flat at 60 cent yesterday following the announcement of operating losses of €81 million for 2009 compared with an operating loss before exceptionals of €20m in 2008.

Despite passenger numbers increasing by almost 4% to 10.4m, revenue fell 11% to €1.21 billion. Ancillary revenue rose 16.2%, however, but cargo and other revenue fell.

The airline was due to release full results for 2009 yesterday but postponed them due to ongoing talks regarding a major cost-cutting programme it is trying to push through.

Analysts are predicting that Aer Lingus will announce the results in two weeks time.

Average fares for the year declined by 16.8% on 2008, representing a 12% fall in short-haul fares and 15.9% fall in long-haul fares.

It posted a pre-tax loss before exceptionals of €66.2 million, after a profit of €18.8m in 2008.

Gross debt fell to €492.6m at end of 2009 from €552.9m in 2008.

Three analysts surveyed by Reuters had expected an operating loss of €86.8m.

Aer Lingus shares have fallen from about 76 cent a year ago and a flotation price of €2.20 a share in September 2006.

At the start of 2009 Aer Lingus had net cash of €653m, which dwindled to €335m 12 months later.

Bloxham analyst Joe Gill said: "It is that cash reserve that keeps Aer Lingus from a far more precarious financial position. Without it the decision by IMPACT to reject restructuring proposals would trigger investor and banking alarm bells.

"We know that Aer Lingus is trading unprofitably in Q1 as seasonally weak demand and a sharp fall in long-haul passenger volume make trading difficult. We know too that a plan is in place to take operating costs down by about 10% in order to restore profitability to the company and stop that €335m from disappearing entirely."

Analysts have pencilled in a profitable 2011 in the wake of an agreed restructuring.

Last year the average fare on short-haul flights was €77.10 and €255.70 on long-haul flights. Ancillary revenue per passenger rose 12% to €16.75.

This appeared in the printed version of the Irish Examiner Wednesday, March 10, 2010