Aer Lingus may seek second State loan as it records €192m operating loss

Aer Lingus could seek a second loan from the State-backed Ireland Strategic Investment Fund (ISIF) as it emerges from tough Government Covid-19 curbs, says chief executive Lynne Embleton.

She was speaking after Aer Lingus reported that its operations lost €192 million in the first six months of this year, a similar loss to the €189 million incurred during the same period in 2020.

Ms Embleton confirmed that it could seek a second loan from ISIF to follow the €150 million it borrowed from the agency in two tranches across December and March.

She noted that Aer Lingus had been the hardest hit of its parent, International Airline Group's (IAG) carriers, largely due to Irish Government travel restrictions, which were among Europe's toughest.

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On that basis, Ms Embleton argued that it would be “appropriate for ISIF to provide more support”.

She pointed out that ISIF loaned the €150 million to Aer Lingus on commercial terms and interest rates. The debt must be repaid in 2023.

The Irish airline’s operations lost €192 million in the first half of this year. The business recorded a shortfall of €189 million in the first six months of 2020.

A once-off €127 million charge for unused fuel hedging left Aer Lingus with overall losses of €316 million in the first half of last year, but it incurred no such charge in the opening six months of 2021.

Interim results published by IAG on Friday show passenger revenue during the six months to June 30th slid to €33 million this year from €315 million during the same period in 2020.

A Government ban on “non-essential” travel, hotel quarantines and other curbs applied throughout the first half of this year. The State only imposed limits on flying from the middle of March 2020.

Bookings still affected

The State eased restraints on July 19th, which Ms Embleton said resulted in some increase in passenger numbers.

“The travel ban has been lifted but there are still some restrictions in place which are affecting bookings,” she added.

Aer Lingus will operate at 40 per cent of pre-Covid capacity during the second half.

Ms Embleton said that pilots had agreed to remain on 50 per cent pay while Aer Lingus was flying a “much reduced schedule”.

She added that the Irish Airline Pilots’ Association had also agreed to a review of pay scales.

IAG, which also owns British Airways, and Spain's Iberia and Vueling, posted an operating first-half loss of €2 billion, half the €4 billion loss it recorded for the same period in 2020.

In the six months, the group drew down on debt facilities agreed in 2020, including £2 billion (€2.3 billion) for British Airways from UK Export Finance.

"Aer Lingus capacity continued to be driven by cargo needs, with flights operating regularly to New York, JFK, Chicago and Boston with very low passenger load factors," the group said.

“Aer Lingus capacity continued to be severely limited by the stringent restrictions put in place by the Irish Government, with passenger load factors averaging only 20 per cent.”

IAG said its passenger capacity in the past three months was at 21.9 per cent of the levels it saw over the same period in 2019, amid the impact of travel restrictions and quarantine requirements.

The group said it expects passenger capacity for the third quarter of 2021 at about 45 per cent of 2019 levels but this remains “uncertain and subject to ongoing review”. It said it was too early to provide a financial outlook for the rest of the year.

"We continue to build resilience by preserving cash, boosting liquidity and reducing our cost base," IAG chief executive Luis Gallego said.