Aer Lingus facing €100m loss as revenues decline 16%

AER LINGUS is expected to record an operating loss of more than €100 million this year after warning that the level of bookings and average fares achieved so far this year is significantly below expectations.

Aer Lingus said yesterday that total revenues declined by 16 per cent between January and March this year.

The number of passengers flown was down 6.5 per cent to 2.09 million. This comprised a decrease of 5.7 per cent in short-haul traffic and a 12.5 per cent fall on its long-haul services.

Total revenue per passenger declined by 9.6 per cent over the period.

Aer Lingus’s net cash declined to €593.6 million at the end of March from €653.9 million at the end of December. This reflects costs associated with a restructuring programme and the final payment for a new A330 aircraft from Airbus.

Analysts predicted yesterday that its net cash could fall below €400 million by the end of this year.

Aer Lingus also indicated that it would seek to restructure the business once again, which is likely to include more job cuts and a reduction in its long-haul schedule.

Bloxham Stockbrokers aviation analyst Joe Gill said the airline could prune its transatlantic schedule back to just New York, Boston and Chicago and cut services to San Francisco, Florida and Washington.

He said long-haul flights from Shannon could also be threatened.

In its statement, Aer Lingus said: “Ongoing cost reduction is critical for the viability of Aer Lingus in the current difficult market environment.

“The board is reviewing the range of options to deliver a sustained reduction in operating costs to align its cost base with the group’s current and expected revenue stream.”

Davy predicted that Aer Lingus would record an operating loss of €104 million as a result of the revised guidance. Merrion Stockbrokers put it at €110 million while Bloxham has pencilled in a €122 million deficit.

The share price of Aer Lingus fell by 19 per cent in Dublin yesterday to 56 cents on foot of the profit warning. That gave it a market value of just €299 million.

Ryanair chief executive Michael O’Leary described the results as “appalling” and said his airline would not be making a third bid for Aer Lingus, in which it owns just more than 29 per cent.

Mr O’Leary added: “They’re running out of cash rapidly . . . there’s going to have to be another restructuring.”

Aer Lingus has also reshuffled its executive management team.

Deputy chief executive Niall Walsh has been appointed as chief operating officer.

Chief financial officer Seán Coyle has been given the added responsibility of heading its short-haul operations while corporate planning director Stephen Kavanagh will also take charge of Aer Lingus’s long-haul and cargo activities.

There was no mention in the statement yesterday of its search for a new chief executive to fill the post vacated recently by Dermot Mannion.

In a note to Bloxham clients yesterday, Mr Gill said: “Aer Lingus needs a full-blown merger with a stronger carrier, and quickly.”