Despite a third consecutive year of rising operating profits, the future for Ireland's Aer Lingus remains cloudy
The state-owned airline made an operating profit of €107 million ($133 million) on revenues of €906.8 million, boosting its operating margin to nearly 12%, a level that would be the envy of nearly every European flag carrier.
However, its net result was a mere €1.2 million after accounting for a large €102.5 million payout for a staff severance scheme established by former chief executive Willie Walsh to cut the airline's payroll costs. As it goes forward, the carrier faces several major challenges. The Irish government has yet to announce a replacement for Walsh, who resigned in December over its reluctance to push ahead with his aggressive low-fares strategy that has turned the carrier around. Walsh has since been named as Rod Eddington's successor as chief executive at British Airways.
In addition, the government has yet to announce what it intends to do with its majority 85% stake in the carrier. It has delayed a decision on a full or partial sale for years, and could be in danger of waiting too long. "The government had a two- to three-year window where it could have very successfully floated Aer Lingus but things are getting more challenging again with fuel costs rising," says a Dublin-based analyst. In particular the carrier needs a cash injection for renewal of its long-haul fleet to expand its profitable international network.
Aer Lingus may also soon see more short-haul competition from local rival Ryanair. The low-cost carrier's expansion at Dublin has been on hold as it wanted to operate from a new, second terminal at the airport.
This left Aer Lingus with a "sweetspot" to expand its own network while Ryanair grew elsewhere, says the analyst. Now the signs are that Ryanair will grow again at Dublin.
MARK PILLING LONDON
Source: Airline Business
