Aer Lingus may post a loss of about €100 million in 2009
Published: 29 Aug 2008
Irish carrier Aer Lingus could make a loss of about €100 million in 2009 if the price of fuel remains high and consumer demand remains weak.
The airline posted a first-half operating loss of €22.3 million compared with a €2.6 million profit a year ago.
The company said it expects a loss between €22 million and €30 million for the full year, which could widen to a "three-figure" million loss in 2009. Aer Lingus said it will give details of new cost-cutting measures by the end of September.
"Even with the reduction in fuel prices over the last few weeks, competitive pressure on fares and volumes will continue and we are at best expected to break even in the second half, delivering a loss for the full year," said Aer Lingus chief executive Dermot Mannion.
"It is now clear that we will require further fundamental changes in our operating cost base in order to minimise losses in 2009 and to help ensure the long-term viability of the business," Mannion said.
"The seasonally weaker first half has been marked by extremely difficult market conditions in the form of unprecedented fuel costs, slowing economic growth in our main markets and a weakness in dollar and sterling," said Mannion. "Fuel is the most significant cost within the business and the 56.5-million-euro increase in our first half fuel costs contributed significantly to a loss."
Aer Lingus said it also planned to cut capacity on long and short-haul flights to limit loses.
Mannion said, "Long-haul capacity for winter 2008/09 will decline by 11 percent year on year, compared to previous plans to grow by one percent, and short-haul capacity in the same period will decline by one percent compared to a previous expectation of two percent growth."
As per the information available, the carrier paid an average of $925 per tonne of fuel in the first half, up from $662. It has hedged 70pc of its estimated fuel requirements for the rest of this year at $1,137 and 20pc of the 2009 requirement at $1,165.
Comments
You must be logged in to post comments.
Viaje said on 1 Sep 08:
It may be time for national governments to step in and help the airlines by subsidizing the cost of fuel. Those few airlines that are making a profit currently may cry foul, but the ramifications of troubled airlines is hurting and will continue hurt nearly all industry and commerce.
Any government assistance on the cost of fuel should only be temporary, but certainly enough time to give the airlines a chance to rework their business models.
The ripple effect of troubled airlines is already had a big impact on travel and tourism. It will get much worse unless something is done to assist the airline industry.