Aer Lingus revenues fall 16%

Shares in Aer Lingus were over 20 per cent lower in Dublin this afternoon after the airline reported a 16 per cent fall in revenues for the three months to March 31st and warned it is facing an “exceptionally tough” trading environment.

At 1pm shares in the airline were trading at 55 cent, giving the company a market value of €299 million. The airline's share price has fallen by over 60 per cent this year.

The company has also announced a reorganisation of its senior management and said “ongoing cost reduction is critical” for the airline’s viability.

The company said it is looking a number of ways in which it could cut operating costs as it expects a loss for 2009 “materially below the bottom” of current expectations.

Already difficult trading conditions had been exacerbated by the possible negative impact of swine flu.

“Falling demand in Aer Lingus’ key markets is, and will continue to contribute to sustained and significant fare pressure”.

Bloxham analyst Joe Gill said the long-haul division will be severely curtailed while short-haul capacity may contract next winter as part of a company restructuring that is unlikely to repeat the largesse of the last round.

The analyst added he believed the airline should now look to merge with another airline as its most significant asset - a cash pile of €653 million - is in peril.

Ryanair chief executive Michael O’Leary said the company would not be making a third bid for Aer Lingus nor would it be selling its stake. The airline is now 75 per cent below the IPO level of 2006.

Passenger numbers declined 6.5 per cent to 2.09 million with the key industry metric of revenue-per-passenger down 9.6 per cent.

Long-haul passenger numbers were 12.5 per cent down.

The decline in passenger numbers came as capacity declined. One short-haul flights capacity declined 4.5 per cent while the volume of available seats on long-haul flights has fallen by 19.5 per cent.

Average fares on short-haul flights were down 10.8 per cent.

Aer Lingus said in a statement the fare decline had been offset by a 14.5 per cent rise in ancillary revenues.

The airline had a cash balance of €593.6 million at the end of March, down 9.2 per cent since the end of December with €80 million having been spent on restructuring costs.

The airline is also reviewing its short haul and long haul businesses and will look at its long-term requirement for long haul aircraft currently on order with Airbus.

As part of the management changes Niall Walsh has been appointed chief operating officer while Sean Coyle will take on the role of head of short haul operations along with his existing role of chief financial officer.

The airline's corporate planning director Stephen Kavanagh has also assumed the role of head of long haul operations.