Aer Lingus saw a return to profit last year as it posted pre-tax profits of €30.4m for the year ending December. This compared with a loss of €154.8m in 2009.
The airline's transatlantic business also returned to profit after what it called a difficult year.
Aer Lingus said its 2010 profits had been achieved despite adverse economic conditions in its core Irish market and significant challenges caused by volcanic ash and weather-related disruptions.
For 2010 the airline's operating profit was €57.6m, compared to a loss of €81m in 2009.
It also said it expects further significant challenges this year, with trading for the year likely to be impacted by oil price inflation, increased airport charges and difficult conditions in the home market.
As its brand and business are rooted in Ireland, Aer Lingus said that given the state of the economy here - and the fact that the Irish market is conditioned to expect low fares - growth will remain challenging, at least for the short term.
Last week, Aer Lingus said it had agreed a deal to pay Revenue €32.5m to settle a dispute over a controversial 2008 redundancy scheme. The settlement covers PAYE, PRSI, interest penalties and related costs arising from the so-called 'leave and return' scheme, under which 715 staff were made redundant, but re-employed within weeks on lower salaries and conditions.
In today's results statement, Aer Lingus warned that if current fuel prices persisted, operating profits for 2011 would be significantly lower than 2010.
Aer Lingus made substantial changes during the year - it reduced its long-haul capacity, closed loss-making routes and launched the €97m cost saving 'Greenfield' programme.
The airline reported a 10% decline in passenger numbers as it cut capacity, but the average yield per passenger was up 12%.
Short-haul revenues up 1.1% in 2010
Aer Lingus said that its short-haul revenues totalled €725m, an increase of 1.1% on 2009's figure of €717.4m. However the number of short-haul passengers was down by over 9% to 8.4 million.
Long-haul revenues were flat at €276.1m despite a 24% cut in capacity, including services to Washington and San Francisco. Long-haul was the airline's main cause of group losses in 2009 and Aer Lingus said it responded by cutting unprofitable routes and reducing capacity to better match it with demand.
Passenger numbers on its long-haul flights decreased by 15.7% to 908,000, it added.
Aer Lingus said that 2011 should benefit from the non-recurrence of events which hit trade last year, including €20m of losses due to winter long-haul flying from Shannon and a €10m hit from the impact of the ash and weather disruption.
'Despite this, 2011 will be challenging due to the muted demand in our primary Irish market as well as inflation in non-controllable costs,' the airline stated.
It said that first quarter of this year saw a difficult start for the airline. Bookings were affected by the severe weather in December and the IMPACT cabin crew action in January and February which saw the airline hire in aircraft to maintain as full a schedule as possible.
Shares in Aer Lingus dropped 4.2% to close at 91 cent in Dublin.
