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Pin to quick picksInternational Airlines Share News (IAG)

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Aer Lingus Again Backs IAG Bid, As Cost Rise Offsets Revenue Increase

Wed, 29th Apr 2015 08:27

LONDON (Alliance News) - Aer Lingus Group PLC Wednesday said it is still strongly backing the takeover offer made by International Consolidated Airlines Group PLC, as the Irish flag carrier said its operating loss stayed flat in the first quarter of 2015 as higher operating costs offset strong revenue growth.

The Irish airline reported an operating loss of EUR48.4 million in the three months to end-March, compared with EUR48.5 million a year earlier, as a 6.7% increase in operating costs to EUR328.4 million offset 7.9% growth in revenue to EUR280.0 million.

Airlines typically make little or no money during the winter months, when air travel is much slower than in the peak summer months. Additionally, they have extra costs in the winter months due to having to pay for things like aircraft de-icing and for any weather-related delays and cancellations.

Aer Lingus said the rise in operating costs reflected the impact of increased fixed costs. It did benefit from lower fuel prices in the quarter, although the impact was limited by the hedging it already had in place, while higher US dollar costs were mostly offset by higher US dollar revenue and currency hedging.

Its revenue growth was driven by a 12.9% increase in total average fare revenue per seat. That in turn was driven by the continued growth of its long-haul operations, where fare revenue per seat rose 20.6% and its load factor, a measure of how full its planes were, rose 4.0 percentage points.

Its short-haul revenue per seat rose a more modest 1.2%, while load factor was up 2.1 percentage points.

Retail revenue per passenger, which includes on-board sales, rose 3.7% to EUR21.87, while its cargo revenue rose 15.1%.

The airline said it ended the first quarter with net cash of EUR650.7 million, up EUR97.0 million compared with a year earlier.

"The board and management team of Aer Lingus strongly remain of the view that a combination of Aer Lingus and IAG has a compelling strategic rationale and will deliver significant benefits to all stakeholders in Aer Lingus," it said of the ongoing takeover attempt by the owner of British Airways and Spanish airlines Iberia and Vueling.

The EUR1.36 billion takeover offer, or EUR2.55 per Aer Lingus share, needs to win the backing of major Aer Lingus shareholder Ryanair Holdings PLC, which is being forced by UK antitrust regulators to sell down its stake, as well as from the Irish government, another major shareholder.

IAG has been in talks with the Irish government, which has demanded that the airline group gives more detail about how it would guarantee employment growth and protect Aer Lingus' routes and identity.

"The IAG offer to acquire 100% of Aer Lingus will deliver significant benefits for all Aer Lingus stakeholders. However, notwithstanding the opportunities that this combination will bring, we are focused on building Aer Lingus and improving our return on invested capital performance," Aer Lingus Chief Executive Stephen Kavanagh said.

"In the coming quarters we will focus on capitalising on peak demand opportunities, while aggressively managing our cost base. On short haul we will continue our demand-led strategy to drive occupancy, manage per available seat yield and retail revenue per passenger. On long haul, we will see the commencement of the new Washington route as well as increased frequencies on New York, San Francisco and Orlando routes. Overall our forward trends are positive," the CEO added.

Aer Lingus shares were up 0.9% at EUR2.37 in London Wednesday morning.

By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1

Copyright 2015 Alliance News Limited. All Rights Reserved.

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