More tickets sold - but Aer Lingus profits down

Aer Lingus revealed today it suffered a drop in profits last year despite recording an increase in revenue.

The airline’s operating profit was down 6.5% to €76m in 2006, while revenues increased by 11.3% to more than €1.1bn.

Substantial increases in fuel costs and terrorism alerts last summer, which caused major disruption to flights to and from the UK, have been blamed for the drop in revenue.

The airline also said it spent €16.2m on fees to financial advisers and lawyers defending itself against a hostile takeover bid by Ryanair last October.

Publishing the results this morning, management maintained that it aims to make further cost reductions in the coming year, with talks continuing with unions to push through measures.

The airline increased its revenue with ticket sales up almost 10% to just under €998m, and the sale of food and drink on board, booking fees, excess baggage charges and car hire, hotel and insurance commissions increasing by 34% to €63.4m.

That figure is set to rise this year following the introduction of baggage charges.

The airline carried more than 8.6 million travellers last year, up by 587,000 (7.3%) on 2005.

The expansion of the short-haul network continued in 2006, with 75 routes flown compared with 64 in 2005, with more than 7.5 million people (up 9.3%) paying an average short-haul fare of €91, an increase of 3.9%.

The main focus of short-haul expansion was on the Ireland/Continental European routes, where passengers carried grew by 19.7% to 4.3 million.

Total long-haul passengers carried fell by 4.4% to 1.1 million people, while the average long-haul fare increased by 6.9% to €280 euro.

“2006 has been a year of fundamental change for Aer Lingus,” said Dermot Mannion, the airline’s chief executive.

“The announcement of our first set of results, as a publicly-listed company, represents another significant milestone in our history. The ownership structure changed substantially through the initial public offering (IPO) and enabled us to raise the equity required to advance our growth objectives and to resolve a long-standing pension funding issue.”

The carrier also plans to expand its fleet from net funds of €400 million euro raised on the stock exchange last year, with deposits already paid on two A330 and two A320 aircraft.

Mr Mannion said throughout the IPO process and the subsequent unsolicited takeover bid by Ryanair Holdings plc, the airline maintained its focus on delivering an enhanced offering for customers and value for shareholders.

“We are continuing to expand our short-haul network, grow ancillary revenues and reduce unit costs in an increasingly competitive operating environment,” he said.

“Despite the UK terrorism incident last summer and the substantial increase in the price of oil, our underlying operating profits remained strong in 2006 and were better than expectations at the time of the IPO.”

Mr Mannion added that the investment in its long-haul fleet will enable the Aer Lingus to expand its transatlantic services.

“We have an experienced, proven management team and a strong balance sheet to support our growth objectives in 2007 and beyond,” he said.