Aer Lingus Expects Full-Year Break-Even

By Quentin Fottrell
Of DOW JONES NEWSWIRES

DUBLIN (Dow Jones)--Aer Lingus PLC (EIL1.DB) Tuesday reported a narrower first-half loss due to cost and route cuts, lower fuel prices, and an improving yield environment, and said it expects to report an operating performance before exceptionals "of no worse than break-even."

Ireland's former state-run airline, which has resisted two takeover bids from low-cost carrier Ryanair Holdings PLC (RYAAY), posted a net loss for the six months to end-June of EUR18.5 million, after a net loss of EUR73.9 million this time last year. It posted a basic and diluted loss per share of 3.5 cents versus 14 cents last year.

First-half revenue fell 3.1% to EUR538 million, while passenger numbers fell 11% to 4.40 million from 4.94 million a year ago.

It posted an operating loss of EUR24 million after net exceptional items, narrower than the EUR93 million loss a year ago, and beating analysts' expectations for a net loss of about EUR40 million.

Chief Executive Christoph Mueller said, "This performance has been driven by strong unit revenue growth coupled with a significant improvement in our cost base.

"Looking to 2011, it remains too early to provide firm guidance on the Group's expected performance. Yields and passenger volumes will be dependent on the economic outlook in our main markets which remains uncertain."

"For the 2010 full year, we expect to report an operating performance before exceptional items of no worse than break even," he added. "This would represent a good performance in difficult market conditions but is predicated on the delivery of committed staff productivity savings and no further significant disruptions to operations from industrial action or airspace closures."

Aer Lingus reduced total operating costs by 14% year-on-year in the first half, or by 7.3% excluding the impact of fuel reductions.

Total short-haul passengers fell by 9.4% to just over 4 million, though the average short haul yield rose to EUR80.21 from EUR73.61 a year ago. Long-haul passengers decreased by 23.7% to 403,000, but the long-haul yield also increased to EUR281.79 from EUR239.92 a year ago due in part to an increase in business class passengers.

Despite previous management comments that Aer Lingus' future as an independent airline was in the balance, Andrew MccFarlane, chief financial officer, said Tuesday that, "We see no reason why we shouldn't have to remain independent." He said the airline will likely join one of the global airline alliances, but no decision has been taken on that.

"We think the business is improving," he said. "We think we've got a very attractive place in the market." At 0730 GMT Tuesday, Aer Lingus shares were unchanged at EUR0.93. The shares are down from their flotation price of EUR2.20 in September 2006, but up from EUR0.51 this time last year.

Aer Lingus has gross cash of EUR1.01 billion.

Company Web site: www.aerlingus.com

-By Quentin Fottrell, Dow Jones Newswires; +353-1-676-2189; quentin.fottrell@dowjones.com