Aer Lingus profits fall 42% despite good growth

Pretax profits at Aer Lingus declined by 42 per cent in the first six months of the year in spite of strong growth in revenues and passenger numbers. Ciarán Hancock,Business Affairs Correspondent, reports.

The airline's pretax profit fell to €11.5 million from €19.8 million in the same period of 2006. The company blamed high fuel costs, an increase in staff expenditure and airport charges for the decline. However, the airline said it expected to have a strong second half of the year and would meet market expectations for full-year profits.

Aer Lingus's fuel costs rose by 28 per cent year-on-year. "That took about €25 million off our bottom line straight away," chief executive Dermot Mannion said. Other operating costs rose by €48.5 million to €455.6 million.

In addition, the company incurred €7.8 million in adviser costs relating to its defence of a takeover by Ryanair. That brought the bill for the defence to €23.8 million. "It was expensive, but that takeover has now been totally defeated," Mr Mannion said.

The recent threatened two-day strike action by pilots cost the company €3.5 million. It said that the matter was before the Labour Relations Commission and the outlook for the dispute was "not yet clear".

Revenues at the airline rose by 13 per cent to €574 million, while passenger numbers increased by 6 per cent to 4.4 million. The company achieved strong growth in its ancillary revenues due to the introduction of baggage charges. Earnings from this area increased by 69 per cent to €50 million.

The average short-haul fare rose by 2.7 per cent €88.90 while average long-haul fares increased by 10.2 per cent to €286.82. The bigger increase in long-haul fares was due to the introduction of a fuel surcharge on flights to the United States and Dubai.

Regarding Ryanair's request for an extraordinary general meeting (egm) to rescind the decision to axe the Shannon-Heathrow route and move the London slots to Belfast, Aer Lingus said that it would announce its decision on the timing of the meeting on Tuesday.

Mr Mannion said that the airline would also hold an egm before the end of the year to seek shareholder approval for a deal to acquire 12 new Airbus aircraft. This deal was announced in June.

"We are working our way through the normal contractual issues on that deal," he said. Aer Lingus is currently considering proposals from Rolls-Royce and GE for the supply of engines for the new aircraft.

The figures published yesterday also show that staff will receive €1.6 million as part of a profit-sharing arrangement. About 3,500 employees will benefit from this, earning on average €457 each.

Mr Mannion said the "early indications" of the airline's profit performance for the second half of this year were "encouraging".

The airline recently launched a new service to Washington DC and it will begin flights to London Gatwick in October. It is also planning eight new routes from Belfast and services to Orlando and San Francisco in the United States.

Aer Lingus's shares closed down 0.4 per cent in Dublin yesterday at €2.42.