Aer Lingus's bottom line, outlook both sink

Warning that it expects a "continuation of the current market trends," Aer Lingus yesterday reported a €73.9 million ($105.5 million) loss in the first semester of 2009, widened more than threefold from the €21.6 million lost in the year-ago period.

"While traffic volumes have stabilized, average fare yields continue to be significantly down year-on-year. Forward visibility on revenue expectations remains poor. Therefore, ongoing significant cost reduction remains critical to manage through the difficult market environment," EI said, adding that "there has been a structural change in fares and in demand for our long-haul business class product in particular."

Half-year revenue fell 12.2% to €555 million against a 1.1% decline in costs to €648 million. Operating loss deepened to €93 million from €23.4 million in the first six months of 2008. Passenger numbers rose 1.7% to 4.9 million but average fare plunged 17.1% to €91.36. "The scale of the operating loss clearly illustrates the extent of the challenges facing Aer Lingus," Chairman Colm Barrington said. "We see no sign of any improvement in the near term."

EI launched a cost reduction program last December that it said will produce savings of €65 million this year. Three weeks ago it reached an agreement with Airbus to defer delivery of a portion of its long-haul aircraft order and also announced the early termination of two A330 leases (ATWOnline, Aug. 5). It plans to cut winter schedule capacity on short-haul routes from Dublin by 14% year-over-year and on its long-haul network by 24%.

During the January-June period EI flew 7.58 billion RPKs, down 2.6% year-over-year, against a 5.9% cut in capacity to 10.44 billion ASKs. Load factor rose 2.4 points to 72.6%. It cancelled service on seven routes and reduced frequencies on 24 others. Christoph Mueller is set to take over as CEO next week.