Shares in Aer Lingus fall 2% as profits slide

Revenues at Aer Lingus advanced by 2.3 per cent to €1.4 billion in the year ending December 31st 2013, as a strong performance from the group's long-haul division offset the impact of good weather on short haul travel.

Profits before tax slid back by 2.2 per cent to €39.5 million, while operating profit fell by 11.6 per cent to €61.1 million”in line with stated guidance. The airline expects the first quarter of 2014 to be weaker than 2013 “reflecting market conditions and the timing of Easter”. However, it expects its operating result for 2014 “to be broadly in line with 2013.”

Christoph Mueller, Aer Lingus chief executive, said that he was "broadly satisfied"with the airline's performance for 2013, but added that Aer Lingus "could have done better".

“In particular, the absence of progress on pension matters inhibited developments on several other key matters for our business ,” he said, adding that the airline’s proposal to address funding difficulties in the IASS “represents a viable solution, which is in the interests of all parties”.

“However, we can no longer defer business improvement initiatives while we wait for this proposal to be implemented and we will press ahead in 2014 to focus on two key areas for our business, namely service and cost.”

Long haul reported a strong performance, with revenue up 11.1 per cent, passengers numbers up 12.2 per cent and load factor up 0.6 points on increased capacity of 11.6 per cent.

Short haul revenue was down by 3.3 per cent "due to extremely good weather in Ireland and Northern Europe in the peak summer period and increasingly competitive pricing environment in Q3 and Q4 2013". Mr Mueller noted that while the airline "faced challenges in short haul markets in the second half of the year, we took effective corrective action to protect margin and in this way delivered a creditable profit".

Passenger numbers at the airline fell by 0.3 per cent, down to 9.6 million, with average fare revenue per passenger, up by 1.2 per cent to €121.62 and revenue per seat up by 2 per cent to €90.43.

The airline had gross cash of € 897.4 million at year end and an 11.4 per cent increase in net cash to € 419.8 million. It announced a dividend of 4 cent per share and expects to “maintain dividends at this annual level for the foreseeable future”

Following in the footsteps of Ryanair, Aer Lingus is set to re-launch its website this year, and will upgrade its long haul business class offering including the introduction of fully horizontal lie-flat seats. In addition, the airline will offer US border pre-clearance from Dublin Airport Terminal Two for all of its summer 2014 schedule flights and it will move to the new Queen's Terminal in London Heathrow, which will "offer an enhanced passenger experience".

In the coming year, Aer Lingus will also introduce its Cost Optimisation and Revenue Excellence (CORE) programme. A two year programme, the goal of CORE is to “ensure that we continue to deliver for our customers attractive and differentiated products that represent compelling value for money”. The three elements of CORE are: (i) cost and business optimisation; (ii) enhancing our revenues by focusing on merchandising, retail revenue and business-to-customer distribution system; and (iii) further improvements in staff engagement, training, flexibility and productivity.