Airline lost €19 for every passenger to July

IN the first six months of 2009, Aer Lingus lost just under €19 for every man, woman and child that flew with the airline.

The group racked up operating losses of €93 million, almost four times the €23.4m loss returned for the same period in 2008.

Aer Lingus blamed the huge dip in consumer confidence, the economic collapse and imposition of the €10 passenger departure tax as key factors contributing to the dramatic worsening in its figures.

Chairman Colm Barrington described the market as extremely challenging as sales for the six months to June 30, 2009, fell 12.2% to €555m from €631.8m. “The scale of the operating loss clearly illustrates the extent of the challenges facing Aer Lingus in the current environment,” he said.

Total passenger numbers rose 1.7% to 4.943m from 4.858m while the average fare fell 17.1% on 2008. Fuel costs that rose 10% to €189.6m hit operating returns while non-fuel costs fell 5.1% to €458.4m.

The airline warned of a further root and branch analysis across the group with staffing levels and other costs facing further rigorous examination.

The cost reduction programme announced in December 2008 will create savings of €65m in 2009.

Future strategy will also involve diversifying risk away from Ireland, chief financial officer Sean Coyle said. The initial emphasis will focus mainly on Ireland and Britain where the bulk of traffic is generated.

Management said “legacy payments” to staff on international flights would have to be cut to reflect the group’s new operating environment.

Aer Lingus has already taken action to manage its capacity and route network including removing 9% of total Irish seats this winter.

The agreement with Airbus on aircraft deferral will significantly reduce capital commitments and is another step towards enabling Aer Lingus to maintain its financial strength, it said.

Aer Lingus said bankers were refusing to lend for fresh aircraft deliveries because it is devouring cash. “No bank is prepared to lend money to an airline that is burning through €400m of net cash in a 12 month period as we have done,” Mr Coyle said.

New chief executive Christoph Mueller, takes over next week following Dermot Mannion’s surprise resignation in April.

Work on the cost savings plan has been initiated ahead of his arrival and the group expects to have the new group strategy to hand before the end of the year.

Joe Gill, analyst with Bloxham Stockbrokers, last night accused the group of having “flittered away” its cash reserves. Aer Lingus has to tackle its cost structure and a radical change in cost per passenger of €131 in the first half of 2009 “is needed urgently,” he said.