Müller eyes up European rivals for acquisition

While the unions are eyeing the Aer Lingus cash pile to plug their pensions deficit CEO Christoph Müller is looking at acquiring European rivals.

The company has net cash of €420m that it could use to pursue merger and acquisition opportunities with other European airlines.

Aer Lingus reported that its operating profit before exceptional items had dropped to €61.1m last year, down €8m on the year before as the good weather kept holidaymakers from leaving the country during the busy summer period.

Mr Müller said that management is in favour of using the Aer Lingus cash pile, which grew by 11% last year, on mergers and acquisitions.

Mr Müller said that 2013 was a positive year for the airline as it recorded strong growth on its transatlantic routes.

“2013 was the first year of significant growth for Aer Lingus since the global economic downturn. We added 11.6% additional capacity to our mainline long-haul network and more than sold this.

“We also successfully commenced contract flying operations and as a result increased our short-haul fleet by four aircraft,” he said.

However, on short-haul routes revenue was down 3.3% due to extremely good weather in Ireland and Northern Europe in the peak summer.

The company’s accounts showed that increased contract flying and wet leases, like that in operation with Virgin Little Red, had resulted in €9m in extra revenue.

“We have had a lot of interest in this model that will result in more growth. We have had a couple of interesting requests like the Little Red arrangement,” he said.

While this new model is generating revenue, Mr Müller said that the industry is facing a different landscape since the collapse of the global economy.

He said that despite discounting there had been no pick-up in volume across the industry while weekend trips and even business travel have declined.

“The airline industry as a whole needs to learn what the customer wants. Hopefully they can,” he said.

As part of the reshaping Aer Lingus launched a cost optimisation and revenue excellence programme which will focus on cutting another €30m in costs from the company’s operating base.

Davy analyst Stephen Furlong said that the company was being well run and said that they expected the airline to perform similarly next year.

“Guidance is that the first quarter of 2014 will be weaker than 2013, reflecting market conditions and the timing of Easter. Based on current trading, Aer Lingus expects the 2014 operating result, before net exceptional items, to be broadly in line with 2013,” he said.