THE SHARE price for Aer Lingus fell by 4.2 per cent yesterday as it warned that profits this year could be “significantly below” the 2010 level due primarily to rising fuel costs and increasing airport charges in Dublin and London Heathrow.
Aer Lingus returned to the black in 2010, posting an operating profit of €57.6 million.
Exceptional costs and other items resulted in a pre-tax profit of €30.6 million being booked.
Net exceptional costs of €34 million were booked last year. This included a €32.5 million settlement last week with the Revenue Commissioners relating to the controversial “leave and return” redundancy scheme implemented in 2009.
This still represented a significant turnaround on the performance in 2009, when Aer Lingus reported an operating deficit of €81 million and a pre-tax loss of €154.8 million.
The return to profit was achieved in spite of a 10 per cent decline in passenger numbers, costs associated with bad weather and volcanic ash and flat revenues at €1.2 billion.
The return to profitability reflected three key items: the costs benefits that have flowed from its Greenfield restructuring plan (it delivered €41.4 million), a double digit percentage increase in average fares and a €65.5 million saving on fuel costs.
Significantly, its long-haul services to the United States were profitable last year.
The swing from losses to surplus was in excess of €100 million, the airline said.
The contribution of its business class cabin to long-haul revenues rose to 21 per cent last year from 16 per cent in 2009 and cargo revenues increased by 28 per cent.
This profit performance was well ahead of analysts’ expectations, but concerns over the future outlook and a potential one-off cost to resolve pension issues, weighed on the share price yesterday. A number of cost pressures were flagged by Aer Lingus.
If oil prices remain at current levels, the airline’s fuel bill will rise by about €31 million.
Airport charges at Dublin and London Heathrow airports will rise by €45 million this year, although most of this can be recovered from passengers. It is also forecasting a €5 million rise in en route and navigation charges.
Costs associated with bad weather and industrial action in the first quarter cost it €10 million. The airline is also planning a €25 million upgrade of its IT systems and will take delivery of four new aircraft from Airbus.
Mr Mueller said there was “limited” scope for further increases in its average fares. “We cannot repeat 2010 [fare rises],” he said. “We would cut our own legs off even if we try it.”
On the controversial “leave and return” redundancy scheme, implemented in 2009, Aer Lingus reiterated that it was reviewing the process that led to the decision being taken two years ago.
Company secretary Donal Moriarty said the review was “ongoing” but declined to say when it would conclude.
He also refused to comment on who advised Aer Lingus on this matter in 2008-09. Mr Moriarty said the airline was taking the matter “extremely seriously”.
Mr Mueller said Aer Lingus was still mulling over whether to join one of the global airline alliances. He said the costs of membership could be as high as €50 million a year.
Its joint venture with United Airlines on the Washington DC to Madrid route carried 109,000 passengers in 2010 and was profitable in its first year.
With United having recently merged with US rival Continental, it has been decided that there will be no expansion of this partnership until 2012 at least.