Rising fuel prices hit Aer Lingus as it warns on profits despite strong 2010

 
City A.M. Reporter
IRELAND’S Aer Lingus could further cut capacity in 2011 if high fuel prices persist, as the airline fears rising costs and higher airport charges will derail the recovery it enjoyed in the past year.

The airline said yesterday it had hedged 62 per cent of its fuel needs for 2011 but would need to review certain cost-sensitive routes if the cost of fuel did not come down.

At current fuel prices, its 2011 operating profit would be significantly below its 2010 figure, it said.

The group also warned it could be constrained in its ability to pass on costs via fuel surcharges because of a weak domestic market, after the country turned to the EU and International Monetary Fund for a bailout.

“We expect significant challenges in 2011, with trading for the year likely to be impacted by fuel price inflation and increased airport charges in combination with difficult conditions in our home market,” chief executive Christoph Mueller said.

“We do not expect that improvements in yield performance and ongoing cost savings can offset these increased costs. If current fuel prices persist, we expect that 2011 operating profit will be significantly below that of 2010.”

Aer Lingus posted a 2010 operating profit of €57.6m (£48.9m), a swing in profitability of €139m and ahead of forecasts, despite bad weather and the volcanic ash cloud which severely disrupted its flights.