Aer Lingus recorded operating profits of €63.8m in 2002, according to its annual results published this morning. The airline warned that the conflict in Iraq will have a significant effect on travel but says it is in a better position to cope than in the aftermath of the September 11 attacks in the US.
Last year Aer Lingus turned a €52m loss in 2001 to a profit of almost €64m, helped by a concerted cost cutting drive and the implementation of its Survival Plan which saw 2,000 redundancies at the airline. Operating costs were shaved by over 22% while passenger loads increased to 79% from 72% in 2001.
The airline's operating margin on continuing activities was 6.7% compared to a negative operating margin of 4.7% in 2001.
As a result of the operating performance, asset sales and fund raising, Aer Lingus said its free cash and liquid resources balance increased by €197.8m to €367.3m by the end of 2002. Net cash rose to €154.9m from €66m a year earlier.
Aer Lingus has focussed on what it believes is the trend in aviation for less business travel and increased competition through low fares for leisure flyers. It said that over three million cheap seats were sold though its website last year and the website is now its primary sales channel.
Airline faces uncertain business environmentThe airline recognises that it now faces 'a very uncertain business environment' with the war in Iraq but it has more than doubled its cash reserves in the past year to over €367m, which, it says, leaves it in a far healthier state than it was in the aftermath of the September 11 attacks in the US.
But with 40% of its business coming from the transatlantic market, Aer Lingus is braced for what it says will be a tougher year for the air transport industry.
War to effect travel patterns'The conflict in Iraq will have a significant effect on travel patterns particularly on transatlantic and long haul routes,' commented Aer Lingus Chief Executive Willie Walsh.
'While recognising this reality, Aer Lingus is determined to respond with initiatives designed to stimulate travel and to win business in this adverse environment,' he added. 'We will monitor developments closely and continue to take the necessary actions to manage our business throughout this period'.
Chairman talks down mergerChairman Tom Mulcahy said the Board of Aer Lingus was not open for discussions with possible investment partners and had not met with any representatives of Texas Pacific or any other potential investors. He seemed to rule out any moves towards a possible partial-privatisation over the short term saying timing at the moment was not conducive to bringing our wares to market.' Aer Lingus has no plans to recruit any permanent staff over the next two years but neither do they see the need to reduce present numbers at the airline. Most of the costs they are targetting are described as non-staff related costs, principally distribution costs. Aer Lingus aim to increase the percentage of tickets sold over the internet. Presently 33% of tickets are sold through their website, with agents' share down from 80% to 50% over the past year. They aim to increase internet sales to 60% over the next two years.
Catering not part of core activitiesWalsh said he had always held the view that catering was not part of their core activities and he hoped and expected a decision on the future of their catering division would be taken by the end of the year. He said they will be talking to catering companies about a possible sale. Neither baggage handling or cleaning were, at the moment, under review.
Aer Lingus said its capacity in 2003 will be increased by 18% in the US market and by 17% in its European markets. Four new routes will also be added it its network, Lisbon, Bologna, Jersey and Baltimore/Washington.
'We made good progress towards the goal of long-term sustainable profitability in 2002,' Walsh said. 'The key to this performance was the relentless and aggressive management of our costs'.
He said the airline had always maintained that its Survival Plan was the beginning and not the end of change in Aer Lingus. 'It is vital that we press ahead with change, continue to drive down our costs, continue to offer still lower fares to our customers and give ourselves the opportunity to manage our affairs successfully through the difficult period ahead,' he concluded.
