expects its operating profit to come in significantly below last year’s level in 2011 if current fuel prices persist.
“We expect significant challenges in 2011, with trading for the year likely to be impacted by fuel price inflation and increased airport charges in combination with difficult conditions in our home market,” Aer Lingus CEO Christoph Mueller said. “We do not expect that improvements in yield performance and ongoing cost savings can offset these increased costs.”
However, the airline managed to greatly improve its financial performance in 2010. Aer Lingus returned to profitability, posting a €57.6 million ($78.9 million) operating profit. The carrier had reported a €81 million loss one year earlier. Mueller introduced sweeping changes to the business model. The airline reduced capacity and carried 9.3 million passengers, 10% fewer than in 2009. By contrast, yields increased 12% and revenues 0.8% to €1.2 billion ($1.64 billion). In the fourth quarter alone, Aer Lingus carried 13% fewer passengers, but saw average fares rise by 19%. The airline points out that the previously unprofitable transatlantic business returned to profits last year. While the airline tried to keep its unit costs down, it has introduced more connectivity to its Dublin base to take advantage of the airport’s geographic location for transatlantic travel.
Financial results were hurt by a €32.5 million charge taken for the estimated cost of a settlement with the Irish Revenue Commissioners for taxation relating to a redundancy scheme that was implemented in 2009. The “Greenfield” cost savings program delivered €41.4 million in savings. Once it is fully implemented, it is expected to reach €97 million annually.
Aer Lingus said that the long-haul fleet, made up of eight330s, is “larger than we currently require,” so that one of the will be sold this year. The airline will also defer the delivery of three more A330s in 2013 and 2014 and replace them with three due for delivery no earlier than 2018. Aer Lingus will then have nine A350s on order, four to be taken in 2015, two in 2016 and three in 2018 or later.