Aer Lingus in ‘challenging trading conditions’
Dublin, June 6, 2009
Aer Lingus, hit by a sharp downturn in the Irish economy, said it faced the most difficult period in its 73-year history and could not give this year's earnings guidance, sending the airline's shares lower yesterday.
"Trading conditions in each of Aer Lingus's key markets are exceptionally challenging," chairman Colm Barrington told the airline's annual general meeting.
The former state carrier is conducting a root-and-branch review of its business to try to stop plummeting passenger numbers, fares and cash reserves but analysts and trade unions have said nationalisation or a bailout by arch-rival Ryanair may be the only solution.
While Aer Lingus passenger numbers rose 2.7 per cent last month the average flight was less full with the load factor at 73.7 per cent from 76.1 per cent a year earlier. Long-haul flights flew at only 66 per cent capacity.
Aer Lingus is almost entirely exposed to the market in Ireland, a small economy set to contract by 8 per cent this year after being hit more than many others by global recession, said a report in our sister publication, the Gulf Daily News.
"Clearly Aer Lingus's pricing is under severe pressure - we are forecasting average fare declines of 23 per cent across the network for full-year 2009," NCB analyst Neil Glynn said.
"May seems to have been a tough month for revenues given load factor declines across the network and volume weakness on long haul."
While Ryanair, which also operates out of Dublin, has predicted a profitable 2009, loss-making Aer Lingus said it could not provide earnings guidance due to the uncertain trading environment.
Barrington is spearheading a business review that will likely see its long-haul business, championed by former chief executive Dermot Mannion, scaled back and a further round of cost cuts.
Mannion resigned in April saying a new chief executive would bring fresh thinking and new ideas to the business.
A replacement has yet to be announced.
Barrington and Aer Lingus non-executive directors will take pay cuts this year after the government wrote to the chairman this week requesting the move. – TradeArabia News Service