Aer Lingus reports 2013 operating profit of €61.1m

Aer Lingus Group has announced its unaudited preliminary results for the year ended 31 December 2013 with an operating profit before net exceptional items of €61.1 million, down by 11.6% from 2012’s figure of €69.1 million.

The average fare revenue per passenger was €121.62, up by 1.2% from €120.15 in 2012. The average fare revenue per seat rose by 2.0% to €90.43 from 2012’s figure of €88.70. The total 2013 revenue was €1,425.1 million, an increase of 2.3% over 2012’s revenue of €1,393.3 million.

The 2013 profit before tax was only 2.2% down on 2012 at €39.5 million from €40.4 million.

Christoph Mueller, Aer Lingus’s CEO commented, “I am pleased to report that Aer Lingus’s 2013 operating profit, before net exceptional items, was €61.1 million in line with our previously issued guidance.

“2013 was the first year of significant growth for Aer Lingus since the global economic downturn. We added 11.6% additional capacity to our mainline long-haul network and more than sold this. We also successfully commenced contract flying operations [for Virgin Atlantic] and as a result, increased our short haul fleet by four aircraft. While we faced challenges in short-haul markets in the second half of the year, we took effective corrective action to protect margin and in this way delivered a creditable profit.

“While I am broadly satisfied with our financial performance for 2013, I believe that we could have done better. In particular, the absence of progress on pension matters inhibited developments on several other key matters for our business. We believe that our proposal to address funding difficulties in the IASS represents a viable solution, which is in the interests of all parties. However, we can no longer defer business improvement initiatives while we wait for this proposal to be implemented and we will press ahead in 2014 to focus on two key areas for our business, namely service and cost.

“In 1Q14, we will launch our Cost Optimisation and Revenue Excellence (CORE) programme. CORE will be a two-year programme and will have three main elements. Our goal is to ensure that we continue to deliver for our customers attractive and differentiated products that represent compelling value for money,” said Mueller.

“The three elements of CORE are:
• Cost and business optimisation – the implementation of simpler, more efficient business processes for our core airline business. This will include the transformation of various support functions into profit centres. Savings will be achieved from further headcount reductions and increased productivity. Our total cost reduction target is €30 million;
• Enhancing our revenues by focusing on merchandising, retail revenue and business-to-customer distribution systems. In particular, we will be focused on selling the additional 20% long-haul seat capacity that we will be adding in 2014 as well as replacing our current passenger reservation system with state of the art technology; and
• Further improvements in staff engagement, training, flexibility and productivity.

“As part of CORE, we will improve our service offering in 2014. We will re-launch our website with a re-designed online booking portal and improve our mobile app. This winter we will upgrade our long-haul business class offering including the introduction of fully horizontal lie-flat seats. In addition, we will offer US border pre-clearance from Dublin Airport Terminal Two for all of our summer 2014 schedule flights and we will move to the new Queen’s Terminal in London Heathrow, which will offer an enhanced passenger experience,” Mueller explained. “These changes will further differentiate Aer Lingus from our competitors, many of whom in recent times are attempting to emulate our ‘value carrier’ proposition. The CORE programme means that we have a lot of work to do in 2014 and 2015.

“We expect the first quarter of 2014 will be weaker than 2013 reflecting market conditions and the timing of Easter. Based on current trading, we expect our operating result for 2014, before net exceptional items, to be broadly in line with 2013,” Mueller concluded.

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