Aer Lingus focuses on growth as IAG parent sees fuel headwind

Aer Lingus focuses on growth as IAG parent sees fuel headwind

Aer Lingus plans to continue to focus on North America for new routes, as a large increase in capacity across the Atlantic and in Europe helped boost 2018 revenues and profits.

Its parent IAG -- which also owns BA, Iberia, and Vueling -- said new routes, such as Philadelphia and Seattle, helped increase Aer Lingus operating profit by 13.8% to €305m, as total revenues rose 8.8% to €2bn.

Fuel and related costs surged 21% to €382m in the year but it still achieved an increased operating margin of 16.8% following “significant” savings from procurement and other cost initiatives, IAG said.

Aer Lingus has also added capacity in Europe but its North American plans are closely watched as it takes delivery of new planes over the coming years.

The Irish airline is the smallest by revenue of the three other major airlines in IAG, where group operating profit rose 9.5% to €3.2bn and passenger revenue rose 6.2% to over €21.5bn.

Run by Willie Walsh, IAG bought Aer Lingus in 2015 when the Government sold its 25% stake.

But IAG said its total earnings in 2019 would be flat on the year.

“It’s fuel,” Mr Walsh said, adding a rising fuel bill had been a headwind in 2018.

“We’re going to see an even larger increase in 2019,” he said.

He said he had not seen evidence of a lull in demand to travel due to uncertainty around Britain’s scheduled departure from the EU on March 29.

We’re not seeing anything specific around the end of March... demand continues to be good.

IAG said it would order 18 Boeing 777-9s and options for 24 more for British Airways to replace 14 747-400s and four 777-200s between 2022 and 2025.

Industry sources said Airbus had been offering a combination of its A350 twin-engined long-range jet and the four-engined A380, the world’s largest airliner which it has decided to stop building from 2022 due to weak demand.

But IAG has voiced its dissatisfaction with the performance of Rolls Royce, which makes engines for the A350. The 777-9 uses GE engines.

Additional reporting Reuters

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