Aer Lingus announce H1 loss of €93m

Aer Lingus yesterday released it's H1 results to the end of June 2009.
For the six months to June 30 the airline lost €93m compared to a €23.4m loss for the same period last year.
Although total passenger numbers were up 1.7% YoY to 4.943m, revenue declined 12.2% YoY to €555.0m.
Yields fell for the period with the average fare falling 17.1% YoY represented by a fall of 13.1% YoY on short haul and 18.5% YoY on long haul.
Fuel costs rose 10% YoY while non fuel operating costs fell 5.1% YoY. Most worryingly is the rapid deterioration in the once celebrated cash pile at the airline. From a figure of €802.6m at the end of June 2008, the airline's net reserves have shrunk at the rate of almost €1m per day to stand at €439.6m at the end of June 2009. If the rate of decline hasn't been arrested the reserves will already have shrunk by a further €60m by the end of August.


In responding to the challenging market place the airline says that it has cut long haul capacity by 18% whilst increasing short haul capacity by 4.3%, largely due to the establishment of a new base at London Gatwick. Further capacity cuts are planned for Winter 09/10 with long haul capacity to be cut by 24% and Dublin's short haul capacity to be cut by 14%. During the first half of the current year the airline has practiced what it terms "Dynamic management of route network to drive maximum returns" - 7 routes were cancelled and 24 had capacity reduction applied.
In it's outlook Aer Lingus says that "there has been a structural change in fares and in demand for our long haul business class product in particular". It expects that market trends at both home and abroad will continue to exert "further significant and sustained fare pressure".
While traffic volumes have stabilized the airline sees yield continuing to decline with poor forward visibility on revenue expectations, thus highlighting the significance of trying to reduce operating costs to compensate. The airline does not give any guidance on full year performance in Thursday's results.
In his summary the airline's chairman Colm Barrington has indicated that the government's €10 travel tax along with proposed increases in passenger charges at Dublin Airport "represent a significant risk to our ability to generate returns at this base", the first hint that Aer Lingus may be about to take the step of relocating it's operations to offshore bases in a last attempt to ensure it's financial future. 
Speaking on RTE Radio's 'News at One' on Friday, Mr. Barrington said the airline had been working on a restructuring plan aimed at returning the company to profitability. While admitting that the airline probably had too many employees he refused to comment on reports in today's press that the airline was about to seek 500 redundancies. He also confirmed that the Shannon - New York service remained under review.


Responding to the results, Ryanair, the largest shareholder in Aer Lingus issued a statement on Friday calling on the Irish Stock Exchange and the Takeover Panel to explain why they allowed the Board of Aer Lingus to mislead shareholders and the markets when they published their defense document in relation to the Ryanair takeover in December of last year.
Ryanair have picked on 4 statements in the Aer Lingus defense document :


"Despite these extremely challenging conditions we expect to achieve profit overall in 2008" (Aer Lingus lost €108m after tax in 2008)


“We expect that significantly reduced fuel prices and a number of management cost reduction initiatives will enable Aer Lingus to continue to enhance profitability in 2009 and beyond”. (Aer Lingus H1 loss in 2009 amounts to €93m)


“Aer Lingus is and will be profitable” 


“Our long-haul business also continues to grow”. (Aer Lingus long haul traffic has fallen by 12% YoY in H1 2009)