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Aer Lingus reports 2008 overall loss despite pre-tax profit
Aer Lingus Group has announced a pre-tax profit of €21.2 million before exceptional items for the year ended 31 December 2008. The exceptional items plus tax took the result to a loss of €107.8 million.
Revenue rose by 5.6% to €1.357 billion in 2008 from €1.28 billion in 2007. Total costs before employee profit share and net exceptional items were €1.375 billion, leaving an operating loss of €17.6 million.
Commenting on the performance, Aer Lingus CEO, Dermot Mannion, said, ‘2008 was a year of exceptionally challenging trading conditions for the aviation industry as a whole. For Aer Lingus, falling consumer demand in key markets, a weakening dollar and sterling, and increased competition across the network combined to put sustained and significant pressure on our business throughout the year. Record highs and volatile movements in fuel prices also had a significant negative impact on the business.
"Despite the significant additional fuel cost encountered during the year, which brought the business from an operating profit to a small operating loss, the Group managed to report a pre-tax profit before exceptional items. 2008 was a year where we made continued progress on operating cost reduction. We also made exciting progress on a range of international developments, including the launch of our Gatwick base, as the Group recognises that continued growth will require us to diversify away from the Irish market on which we have been over-dependant. Our focus on driving revenue growth, together with a significant reduction to our operating cost base will benefit the Group over the medium-term.
"Achieving passenger growth in a downturn is testament to the transformation Aer Lingus has made in the last number of years and will be the key to providing a platform for a diversified, strong business for the future. Since the IPO, we have focussed on transforming Aer Lingus from an Irish business to an international airline. We have made significant progress towards this objective with the establishment of two international bases and a range of long-haul partnerships, which include Aer Lingus’ first non-Irish routes. While Ireland will always be a core element of the Aer Lingus operating platform, diversifying our revenue streams out of the Irish market is key to the long-term success of this business.’
Aer Lingus says that while it expects to grow passenger volumes marginally in 2009, forecasting a full-year outcome in a weak and rapidly deteriorating operating environment is difficult. The weakening economic environment has, in particular, impacted the cargo and Premier sections of its business.
Since the start of 2009, the continued and accelerating flow of negative economic data from the Irish and international markets, together with the increasing numbers of people out of work, has weakened consumer demand. Passengers are increasingly booking later and lower fares are necessary to ensure load factors remain stable. To maintain volumes, it is now expected that in 2009 average fares will decline by a minimum of 10% as compared to 2008. The Group is therefore forecasting a larger operating loss in 2009 than in 2008 and as such, the Group is unlikely to meet its previous guidance of a pre-tax profit in 2009.
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