Airline shows improvement but bases at Gatwick, Belfast struggle with losses

AER Lingus is showing signs of improvement this year but its Gatwick and Belfast bases are struggling with losses.

Aer Lingus delivered an operating profit of €12 million in the second half of last year and said the first three months of this year are performing ahead of 2009.

The airline said its full-year loss widened by 18% in 2009 to €130m. The figure compared with the previous year’s loss of €109.8m. In its full year results announcement it said 74% of staff have accepted the proposals for cost-cutting measures and it is now pushing ahead with the implementation of these plans. The carrier said plans to lay off 670 staff would secure its future.

Long-haul revenue per passenger in the first three months of 2010 was above the previous year while short-haul was in line with 2009.

It said the Gatwick losses were deemed unacceptable by management and resulted in the capacity reduction programme announced in January 2010.

Short-haul trading in Dublin and Cork however was “broadly satisfactory” the company said.

It said that while Belfast was loss-making in 2009, it is a new base and is trading on an “improving trajectory”.

Chief financial officer Andrew Macfarlane said the improved 2010 doesn’t mean the airline has turned the corner. It said that the outlook for the company was uncertain.

Shares rose 4% yesterday to 75 cents. The stock has gained 17% this year, boosting the carrier’s market value to €388m.

Christoph Mueller, who became chief executive officer in September, said implementation of the cost reduction programme “remains vital”.

“The outlook for 2010 remains uncertain. However, we are satisfied that we have started the process of improving yields,” he said.

Revenue fell 11% to€1.2 billion. Exceptional costs included €51.9m in payments to employees losing their jobs.

Capacity was cut by 4% last year compared with 2008 while the average fare declined by 16.8% on 2008.

Total passengers were up 3.8% to 10.4m however.

The airline said it benefited from a 17% drop in fuel costs and cut other operating costs by 2%.

“All our primary markets remain in recession, in particular the group’s core Irish market,” it said, adding that the Government’s €10 air travel tax is also likely to have a negative impact on its performance in 2010.

Gatwick capacity has been reduced from five to three aircraft with Aer Lingus now serving only Dublin, Cork, Knock and Malaga.

Bloxham analyst Joe Gill said given the overall state of its market the comments from Aer Lingus provide some promise of stability within the business.

“With further reductions planned in long-haul capacity this year, lower fuel costs and the benefits of restructuring, losses ought to be significantly lower that in 2009,” he said.