AER LINGUS’S share price slipped by 7.5 per cent yesterday after the airline warned that operating profit this year would be lower than in 2011 due to continued weak consumer demand and rising oil prices.
“Our expectation for 2012 is that the group will remain significantly profitable, albeit below 2011 levels,” the airline said yesterday as it published full-year results.
Aer Lingus said its fuel bill would rise by €60 million this year if the current high price of oil persists for the full year – it was trading at about $1,100 a tonne yesterday.
This threatens to wipe out Aer Lingus’s 2011 operating profit of €49 million, although analysts expect the airline to book modest revenue growth to offset the rise in fuel costs.
Davy analyst Stephen Furlong lowered his operating profit forecast for Aer Lingus in 2010 to €35 million from €61 million previously.
“That [decline] is broadly all fuel [related],” Mr Furlong said. “The airline has very little pricing power to use to pay for fuel.”
Aer Lingus said capacity for 2012 would remain flat and fare increases would be harder to achieve due to continued weak consumer demand in the downturn and further austerity measures from the Government.
As it was, operating profit for last year was below the €52.5 million it booked in 2010.
Aer Lingus reported a 6 per cent rise in revenues in 2011 to €1.29 billion. The airline carried 9.5 million passengers, a 1.8 per cent increase on the previous year, while average fares rose by 4.8 per cent to €112.27.
The company’s pretax profit increased to €84.4 million from €27.2 million in 2010. This turnaround was down to two factors: Aer Lingus was able to book a €37.2 million exceptional gain in 2011, including a €21 million payment from the Dublin Airport Authority for the surrender of a lease on Aer Lingus’s former head office building.
This compared with exceptional costs of €31 million in the previous year.
Full-year results were slightly ahead of analysts’ expectations. Davy had forecast an operating profit of €45 million.
However, yesterday’s figures indicate that Aer Lingus had a tough fourth quarter, particularly December, which did not meet expectations. The airline recorded a loss before exceptional items of €17.6 million in the fourth quarter compared with a deficit of €7.7 million in 2010.
Fuel costs rose by 32 per cent in the period, while airport charges were up 11 per cent.
Aer Lingus chief executive Christoph Mueller described trading in the fourth quarter as “very tough”.
In relation to the State selling its 25 per cent stake in Aer Lingus, Mr Mueller said that, while it was “ultimately the Government’s call”, the airline has received significant interest on recent roadshows from potential investors “prepared to take a stake of 5 to 10 per cent” in the company.
He expects the Government to sell its stake either in late 2012 or early 2013.