Aer Lingus shareholders warned not to expect dividend in the short term

AER Lingus shareholders should not expect a dividend payment in the short term, given that it is battling to return its transatlantic operations to profitability.

The airline expects its long-haul operations to be loss-making this year, but is implementing changes to ensure it is profitable next year, chief executive Christoph Mueller said.

With the pulling of transatlantic routes from Shannon for winter 2011, Mr Mueller said there is a “fairly good chance” the long-haul business will enter positive territory next year or as soon as Ireland is out of recession.

Aer Lingus is suspending transatlantic services from Shannon during the first three months of next year and, based on the numbers for last year, that decision “could have been much worse” said Mr Mueller.

Speaking at the airline’s AGM in Dublin yesterday, he said demand is “particularly low” on the routes in winter, as most hotels are closed during that period.

Mr Mueller added that if bookings for summer next year are similar to this year the sustainability of the route should be “all right”.

“Of course we are going to monitor the situation. It is mainly used by American tourists visiting Ireland and, if the US dollar exchange rate stays where it is we hope that Ireland will be more attractive to American tourists,” he said.

On the possible payment of a dividend, similar to that proposed by Ryanair, Aer Lingus chairman Colm Barrington said “nothing is ruled out”, but added that “I may go to the moon in 2011 but it’s unlikely”.

“A year ago, six months ago, everyone was predicting that Aer Lingus was about to run out of cash.

“Our job at the moment is to stabilise the operations of this company, to get it back on a long-term profitability footing and at that point in time we will look at how we will dispose of the cash. So don’t be looking for a dividend in the short term I can assure you, but what happens in the future nobody can predict,” said Mr Barrington.

Mr Mueller said the franchise agreement with Aer Arann, announced earlier this year is performing “above expectations”.

“Our purpose is to connect Ireland with the world... we can constantly seek an improvement to our network,” he said.

He said summer bookings were impacted by the ash crisis but “particularly on long haul we see the business is coming back”.

The airline chief executive said he is not sure if hits on short haul are due to the ash crisis or the increasing unemployment rate in Ireland or diminishing disposable expenditure.

“The situation in Ireland remains very, very challenging. We are still not out of recession” he said.

Mr Barrington said the airline is “satisfied” with forward bookings for its long-haul operations, but it is expecting a modest decrease in its short-haul bookings for the summer.

He told the small meeting of shareholders Aer Lingus made more progress in April and May 2009 after halving its operating loss in the first three months of the year.

He said the ash crisis would cut earnings by about €20 million this year.

The airline remains “cautious” over its full-year performance.

Aer Lingus shares closed up 2% at 76 cent yesterday.