Aer Lingus turns in profits of €63.8m

AER LINGUS made operating profits of €63.8m against losses of €50m in 2001.

Despite the sharp turnaround however, Aer Lingus chiefs yesterday ruled out a sell-off of the airline this year, a possibility raised earlier by Tánaiste Mary Harney.

Aer Lingus chairman, Tom Mulcahy, said the climate wasn't right adding that the Government would ultimately take that strategic decision.

Relentless cost cutting was the main reason for the significant turnaround in the 2002 performance, chief executive, Willie Walsh said.

In the past year the group slashed 2,000 jobs in a major cost-cutting exercise and 150 more jobs will go this year in a voluntary severance deal.

Sales fell by 12.6% but the dip was more than compensated by the cost cutting which included a huge boost in online booking.

That factor and a reduction to 1% in commissions to travel agents saw booking costs fall by 40%.

Mr Walsh expressed confidence in the airline's future despite the backdrop of war in Iraq. The airline expects to carry more passengers than last year and says it is better prepared than it was in the after math of 9-11.

North Atlantic and European bookings are well up with figures out of the US ahead by 33% on last year so far this year while bookings out of Europe are ahead by 40%.

The north Atlantic still accounts for about 40% of the airline's business.

Routes to Baltimore, Washington, Lisbon, Jersey and Bologna are to be added to the group's network this year increasing capacity by 18% in the US market and 17% in the European. Key figures for 2002:

Operating profit of €63.8m against a 2001 loss €52.1m.

Exceptionals of €25.7m cut profits to €35.3m

In 2001 the group suffered total losses €140m after rationalisation charges of €104.1m.

Free cash balance increased by €197.8m to €367.3m.

Costs reduced by €255m or (22.1%) to €898.4m in 2002.

Passenger load factor increased to 79% in 2002 compared with 72% in 2001.

Sales fell 12.6% to €958.6m.

Operating margin 6.7% compared to 4.7% in 2001. Chairman Tom Mulcahy said: "We made significant progress in 2002."

Cost cutting and lower fares were the twin strategy underpinning the sharp turnaround, he said.

Outlining the reasons for the turnaround chief executive, Willie Walsh said:

"We have a very clear and simple business strategy. It is about the relentless and aggressive reduction in our costs and passing on the results in the form of lower fares to our customers."

Such a strategy means more people travelling, higher load factors and sustainable profits.

"This enables us to grow, open more routes and provide direct access to more destinations for our customers," he said.

"Aerlingus.com booking system has become our primary sales channel and provides easy access to low fares for both leisure and business customers and about 40% of bookings are now done through the net," he said.

"The focus on costs has made the airline leaner, more flexible and more competitive.

"We are not just talking about new routes we are delivering 13 new routes in little over a year all growing in response to customer demand," he said

The commitment to continuing cost cutting will see a further reduction of €130m.

The savings will be passed on to customers in lower fares, he said.