Aer Lingus grounds another plane as sales dive further

Published on Monday 9 November 2009 20:46

AER Lingus, Ireland's formerly state-owned airline, unveiled a further slide in revenues yesterday as a surge in numbers of short-haul passengers was unable to compensate for a drop in long-haul flights.

The Dublin-based carrier, which last month unveiled plans to cut a fifth of its workforce, announced it was stripping out another plane from its long-haul service, to trim winter and summer 2010 capacity further.

Revenues fell 9.7 per cent year on year in the third quarter, although the number of passengers rose 7 per cent and the group said it was filling its planes better, with the load factor up across long-haul and short-haul flights.

Passenger numbers on long-haul fell 13.2 per cent while short-haul numbers rose 10 per cent. But long-haul average fares dropped 18 per cent as the airline struggled against the consumer spending slump.

Aer Lingus said the pace of decline in fares had levelled off and an 8.5 per cent hike in sales per passenger on extra charges for short-haul flights, such as checking in baggage and advanced seat booking, also helped.

The group's chief executive, Christoph Mueller, who joined in September, is leading a major overhaul and cost-cutting drive to steer the firm back to profit. It is shedding 676 staff and the group is changing its pension arrangements under the first phase of his turnaround plan, over which it is currently in talks with unions, a process it hopes to resolve by about 18 November.

Aer Lingus aims to shave about 97 million (86.5m) off its annual cost base. Yesterday it signalled that the focus would remain on cost-cutting as recession pressures were also hampering the sector's recovery.

"Cost increases in the form of higher fuel prices, airport and navigation charges together with further expected gross domestic declines and unemployment increases in our major markets will mean that we must continue to reduce any costs within our control so that we can cope with continued falling fares, compete and maintain balance sheet strength," the company said.

But the airline, which has twice fended off hostile approaches from its arch domestic rival, Ryanair, added: "Actions taken to remove capacity on underperforming parts of the network have had a positive impact on stabilising load factors and yields while reducing operating costs.

"While the fall in yield (revenue per passenger] year on year continues, the pace of decline in average fares does not appear to be accelerating currently."

Aer Lingus has been hit by falling fares as it competes with rivals such as Ryanair to attract passengers, while rising fuel costs have also dented its bottom line.

The group reported losses of 93m for the first half of 2009 – almost four times the figure for the same period last year.