Aer Lingus confident of small profit

AER LINGUS expects to report a small operating profit for the second half of 2009 but will scale back operations at Gatwick.

Its shares soared more than 7% yesterday to 67 cent on the back of the announcements.

The airline said better than expected yields in the second half of last year and cost and capacity management actions in the period will enable it to report the profit after exceptional items.

In a trading update the airline said demand will remain “soft” for the first six months of 2010, meaning it will “maintain its focus on tight capacity management to improve yields”.

Aer Lingus will also reduce capacity at Gatwick to three Airbus A320 from five aircraft, effective March 31. They will serve three existing routes to Malaga in Spain, and Dublin and Knock in Ireland, plus a new route to Cork.

It said these changes reflect weak consumer demand and continuing challenges in the British operating environment.

Aer Lingus has also reached agreement with Airbus on the deferral of two A320 aircraft originally due for delivery late this year to the middle of next year.

“This revised delivery schedule is in addition to earlier deferrals previously announced by the group in 2009. Aer Lingus negotiated the revised delivery schedule at no additional cost to the group,” it said.

Analysts said the cutbacks at Gatwick are good news for Ryanair and easyJet, especially in the run-up to the busy summer period.

Goodbody Stockbrokers said the move clearly is a negative for Aer Lingus’s growth plans in short haul, but cutting back loss-making routes will be helpful in preserving cash in the short to medium term.

“It is even more imperative that the carrier achieve its targeted cost saves with the pilots, in which it is currently in arbitration,” said Goodbody’s analyst Marina Houghton.

Aer Lingus also said total passenger numbers in December 2009 rose 9% to 766,000 year-on-year with short-haul passengers up 13% at 693,000, but long-haul passenger numbers down 20% at 73,000.

In the year total passenger numbers increased 3.1% to 10.74 million from 10.42m a year ago.

This compares with a 12% increase in passenger numbers for Ryanair last month to 4.9m and a 13% increase for the year to 65.3m passengers.

Bloxham analyst, Joe Gill said: “All the signs are that Aer Lingus is hunkering down to become a company focusing on Ireland that wants a strategic alliance with a global partnership. In relation to last year, it’s definitely a better commentary.”

Earlier this week Ryanair ruled out a further bid for Aer Lingus.

The airline said a third bid is “highly unlikely” as long as the Government continues to control 25% of the former state airline.

“We have twice made an offer to the Government at ludicrously generous pricing terms to acquire their share in Aer Lingus,” said chief executive Michael O’Leary.