Cost cuts help take Aer Lingus to profit of €17m

 

Aer Lingus has reported pre-tax profits of €17 million in the six months to the end of June and expects this to swell to €75 million by year-end.

The airline, which has been extensively restructured, says its low fares and cost-reduction strategy is working and that it is well-placed to make further progress.

"In 2003 and next year, Aer Lingus will be pursuing a very simple formula. We will drive down costs and reduce air fares," chief executive Mr Willie Walsh said yesterday. He indicated that passengers could expect double-digit reductions in the cost of flying with Aer Lingus across all of its routes.

Mr Walsh noted the strength of the airline's performance against a tough environment when air travel was depressed by Severe Acute Respiratory Syndrome and the war in Iraq. He said he was encouraged by forward bookings. "There are many challenges ahead. The progress we have made will act as a spur to further change."

The airline's operating profits rose to €14.3 million in the first half of this year compared to losses of €12.6 million in the same period in 2002.

Lower air fares introduced to stimulate demand depressed turnover, which fell by 8.6 per cent to €414 million. The airline's costs fell more rapidly, by 14.2 per cent, to €399.8 million. At the same time, Aer Lingus enjoyed significantly higher loads on its flights, with an average of 80 per cent of all seats filled compared with 73 per cent last year.

The airline does not disclose the yield per passenger but will consider making this figure available at the full-year stage, Mr Walsh said.

Aer Lingus is currently examining its entire aircraft fleet and a proposal to operate a single make of aircraft as a further cost-saving measure will be brought to its board of directors at the end of September.

Its website, Aerlingus.com, has continued to attract more bookings with about 35 per cent of all flights now purchased over the internet. By year-end, Aer Lingus expects this to rise to 50 per cent and to 70 per cent in 2004, which could yield annual savings of about €40 million.

The number of passengers travelling on its European and UK routes rose by 15 per cent, while on the transatlantic route, the increase was 23 per cent following aggressive price cuts.

Mr Walsh said that traffic on the Dublin to London route had suffered most as a result of SARS and the war, mainly because passengers who would have flown with Aer Lingus to Heathrow to make onward connections to Asia and the Middle East postponed their plans.

About 60 per cent of its revenues were generated on the Europe and UK routes with transatlantic flights bringing in 40 per cent, according to Mr Walsh.

In the past 18 months, Aer Lingus has added 16 new routes, bringing its total to 42.

It has announced two new routes that will open in October and there are plans to add a further six to eight routes next year, he said.

The airline has stopped flying to London's Gatwick Airport and will end its service to London City Airport in October. Mr Walsh says it has plenty of scope to grow at Heathrow, where it has valuable slots.

Mr Walsh said he was not engaged in finding a potential partner or the privatisation of the airline.

"We don't spend any time on that issue. It is an issue for the Government. We focus on doing what is right for the airline, regardless of ownership."