Aer Lingus Interim Management Statement

Aer Lingus today issued an interim management statement covering the first nine months of the company's financial year.

During the nine months ended September 30 revenue increased by 8.5% over the same period in 2007.

Short haul passenger numbers grew by 10.2% YoY against a short haul capacity growth of 17.5% in available seat kilometers. Short haul load factor was down 1.1% over the same period in 2007.

Long haul passenger numbers grew by 6.6% YoY compared to a long haul capacity growth of 20.2% in available seat kilometers. Long haul load factor fell by 5.5% YoY.

The airline expects that against a background of weakening consumer demand that fares will continue to be under pressure for the remainder of 2008. A YoY reduction of 6 to 7% in short haul and a marginal increase in long haul fares is forecast for the full year 2008.

In the area of operating costs the airline said that 'there is no choice but to address legacy work practices, pay rates and pay inflation which are inappropriate to the business model and the competitive environment in which Aer Lingus operates'. The airline further states that they had engaged with unions in order to seek alternative cost reduction proposals to those identified by the Board on October 3. In the absence of alternatives, agreed by December 1, 2008, which deliver the equivalent level of annual cost savings, Aer Lingus will proceed to implement these approved proposals.

At the time of the announcement of the company's half year results Aer Lingus stated that they would be reducing capacity for Winter 2008/9. Today's statement outlines a further reduction in long haul capacity for Summer 2009 by cutting the A330 fleet from 9 to 8 frames. An as yet unspecified reduction on a number of long haul routes will result.

The airline had previously indicated an operating loss of between €20m and €30m for FY 2008. The company now expects a close to break even performance for H2 which would yield a full year result of €20m loss and have forecast a loss for 2009 given the worsening economic outlook.

Finally, Aer Lingus expect that the travel tax outlined in the recent Irish government budget will cost the airline €30m off the bottom line as they expect to have to absorb the cost on 75% of their bookings from next March.