AER Lingus is expected to report a net profit of £31-£33 million, when it releases its annual report tomorrow. The figure will be more than double the 1995 figure, due mainly to substantial savings on interest payments.
However, the company's operating profits for 1996 are understood to be down to £40-£44 million, compared to around £50 million in 1995. This is understood to be due to the airline having sold off many of its non core activities, including the Airmotive plant in Dublin.
Turnover, which was £790 million in 1995, will be down slightly, again because the company is concentrating on its core business of air transport. Taking into account operations that have been discontinued, turnover will be up 10 per cent. Aer Lingus has benefited from the uplift in the economy, resulting in increased air traffic.
Profit on ordinary activity before tax will rise from £18 million in 1995 to over £40 million last year.
The company has also managed to reduce radically the interest charges it pays to service its debt.
In December 1995, the final £50 million of the Government's £175 million rescue package was approved and this was used to pay down debt.
Lufthansa Technic, the maintenance subsidiary of the German airline Lufthansa bought a majority stake in Airmotive last year. It is estimated that the company, paid around £10 million for the stake.
Airmotive, which maintains and overhauls jet engines and employs 430 people in Rathcoole, Co Dublin, was set up 10 years ago.
Aer Lingus, like all other airline operators, is facing intense competition at home and abroad. The Government has asked the airline to submit proposals on entering a major strategic alliance by the end of this year. This may include selling part of the airline.
Aer Lingus chief executive Mr Gary McGann has warned that the airline would have to increase its profits substantially as there would be no more State equity available and no further non core assets to sell.
The last £50 million approved by the EU was subject to the implementation of the so called Cahill plan. It was conditional on the airline cutting its own annual costs by more than £50 million.
