Aer Lingus says profit hit by surging fuel costs

City A.M. Reporter
Irish airline Aer Lingus expects high fuel prices, increased airport charges and a weak domestic market to hit its 2011 performance after it returned to profit in 2010 following cost cuts.

The company said it had posted an operating profit of €57.6m (£49m) in 2010, a swing in profitability of €139m, despite bad weather conditions and the volcanic ash cloud which severely disrupted its flights.

But it expects 2011 to be tougher still.

"We do not expect that improvements in yield performance and ongoing cost savings can offset these increased costs," Chief Executive Christoph Mueller said.

"If current fuel prices persist, we expect that 2011 operating profit will be significantly below that of 2010."

Aer Lingus said it expected its capacity to remain flat in 2011, unlike other European carriers, because of its difficult home market which has been hit by a severe economic downturn and is reliant on a European Union and International Monetary Fund bailout.

And it also expects its 2011 fuel bill to be substantially higher than the 2010 bill.

"While we expect to see the benefit in 2011 of the flow-through of actions taken in 2010 and some benefit from further cost saving measures, these upsides will not be sufficient to deal with the twin increases in cost in airport charges and fuel," it said.

Aer Lingus posted full-year revenue of €1.22bn. It's operating profit of €57.6m was ahead of forecasts.