IF OIL hits $200 a barrel the airline industry will not survive according to the chief executive of Aer Arann, Garry Cullen, who said the cost of fuel is going to make this a very difficult year for the Irish airline.
“Nobody likes fuel where it’s at. We were fully hedged to June and we have a small hedge to the end of the year. 10% is enough for us to hedge at the moment with the prices that are out there.
“If oil goes to $200 I don’t know if any industry will be okay,” he said.
But this year has already had it challenging points for Aer Arann.
Despite putting on a brave face at the time it said it is disappointed at losing the government-subsidised Kerry/Dublin route to Ryanair.
“The Kerry business market was very important to us and we got a lot of letters from people who said they were disappointed that they couldn’t get the frequency any more that we could offer them on the route.
“We were disappointed to lose the route. We had a good working relationship with the market down there — a lot of corporate customers — but life throws these things and you move on,” said commercial director Fergal Barry.
Aer Arann was quick to point out that its main focus is not on expansion this year but growing the business it already has.
“We’ll increase frequency on some routes and we may exit some routes if they’re not working but nothing major is planned for this year,” said Mr Cullen.
The airline hopes to have 18 aircraft by 2010, which will include 10 new planes.
Aer Arann has also received board approval for the complete refurbishment of some old aircraft.
But there’s a thorn in its side in the form of Ryanair.
Aer Arann’s chief executive does not want to get into a slagging match with Ryanair’s Michael O’Leary, saying it has found itself in a peculiar competitive situation with Ryanair, particularly in Cork.
But the airline, which last month said to its customers either use the Cork/Dublin service or lose it, said it is no longer keeping the route under review on a weekly basis.
Mr Cullen does admit that Aer Arann shouldn’t have cut back on the frequency of service it offered on the route.
“It’s important to have frequency of service — with an airline it’s key,” he said.
Mr Cullen also said that Aer Arann has enough internal resources to run the company for the next few years.
“Clearly we live in a time when markets are generally soft and the thing we’ll be looking at now is mid-June to September.
“It’s the summer months when airlines really make their profit and a lot of the indications are that there’s not going to be much growth in the discretionary leisure market. Clearly that’s a concern for us,” said Mr Cullen.
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