Aer Lingus braced for tough year

Aer Lingus warned today it faced significant headwinds as it battles against rising fuel costs and strong competition.

The operator, which posted a better-than-expected 16% rise in 2007 operating profits to €88m, said the “challenging times” faced by airlines increased the importance of its cost saving programmes.

It has already started initiatives to tackle areas such as staff costs, fuel consumption, aircraft utilisation and airport handling costs.

Aer Lingus said 36% of its remaining 2008 fuel requirements were hedged, with the rest exposed to market fluctuations. Each five US dollar change in the price of a tonne of jet fuel has an effect of $1.5m (€968,000) on the cost of its unhedged fuel for the period between March and December.

The company, which listed on the Irish and London Stock Exchanges in 2006, has increased capacity through the addition of new routes and December’s launch of operations from Belfast International Airport to eight European destinations.

It has also been the first airline to take advantage of the EU/US Open Skies agreement with the launch of three Ireland to US routes – at Washington, Orlando and San Francisco.

Chief executive Dermot Mannion said: “Open Skies offers us new opportunities for growth while our continued focus on reducing costs will underpin our overall performance.”

For the seasonally weaker first half of the financial year, Aer Lingus said it expected revenues per kilometre flown to be lower than last year, with pressure on load factors outweighing further growth in ancillary revenues, such as baggage charges and hotel commissions.

The airline said it was too early to have a clear view on the second half, but forward bookings for the peak summer period as a percentage of capacity were in line with last year.

Mr Mannion added: “It is clear that all airlines are operating in challenging times and Aer Lingus is no exception.”