Aer Lingus reports H1 2014 improvement of 40% despite €10m effect of strike action

Aer Lingus Group plc today announced its results for the three month (Q2) and six month (H1) periods ended 30 June 2014.

The airline delivered a strong performance for the first six months of 2014, despite the adverse effect of operational disruptions and strong competition, particularly in certain short haul markets. Overall passenger volumes increased by 1.0% to 4.615 million and the load factor was up by 0.6% even with capacity growth in the period of 5.3%. Total revenues were up 6.0% to €697.2 million (2013: €657.9 million) with fare revenue per seat increasing by 5.5% to €89.18 in H1 2014.

The first half of the year is seasonally loss making for Aer Lingus. However, the Group’s H1 2014 operating loss before net exceptional items of €9.9 million represents a 39.6% improvement over the previous year. This first half operating result would have approached breakeven in the absence of strike action in the first six months of 2014.

Even with the strike action, Aer Lingus’ Q2 2014 operating profit of €38.7 million was its best reported second quarter result for at least five years.

This represents a 32.9% improvement on the prior year (Q2 2013: €29.1 million) driven by an 11.1% (or €36.5 million) increase in passenger fare revenue supported by robust short haul performance and successful deployment of additional transatlantic capacity.

Commenting on the results, Christoph Mueller, Aer Lingus’ CEO said:

“We are delighted to announce that Aer Lingus’ successful business model has delivered a 40% improved operating result and a 26% increase in free cash flow in H1 2014 despite the negative effects of lost revenue caused by the cabin crew industrial action.

We sold the 25.3% additional long haul capacity deployed in Q2 2014 with 29.2% more revenue passenger kilometres; 5.3% higher long haul yields and a 2.6 percentage point increase in long haul load factor. Aer Lingus’ transatlantic offering represents a real low cost long haul service and we continue to attract more and more passengers in the North Atlantic transfer market from both European and US locations, most of them through our online booking portal.

Short haul was predominantly impacted by the cabin crew industrial action in the first half of 2014 and short haul passenger traffic on Aer Lingus mainline services was down 0.7% for the first half of 2014. Due to swift and efficient countermeasures by our revenue management team, we were able to partly recover our forward bookings in late summer. However, we are still carrying an estimated negative booking gap of €10 million into the second half of 2014 with some limited potential for further recovery.

Aer Lingus Regional franchise services, operated by Stobart Air, carried 26% more Aer Lingus passengers in the first half of 2014 than the same period in 2013 and continue to contribute strongly to a positive UK and long haul performance. When mainline and franchise services are viewed together, total Aer Lingus short haul passengers increased by 2.1% in the first six months of 2014. Nevertheless, short haul markets remain highly competitive.

During the past two years, we have invested selectively in carefully chosen opportunities such as increased transatlantic flying, contract flying on UK domestic routes and an aircraft leasing joint venture. We are now seeing returns from our investments in these new services and areas and the positive impact of these returns on our business.

Based on recent trading trends we once again expect that full year 2014 operating profit (before net exceptional items) will at least in line with 2013 (i.e. €61.1 million).”