Aer Lingus has issued its third profit warning this year, saying trading conditions had worsened markedly during the first quarter.
The airline, which is currently without a chief executive following the resignation this month of Dermot Mannion, forecast a loss for 2009 “materially below the bottom of the range of current market expectations”.The airline has made sweeping cuts in capacity, especially on long-haul routes, but it said further cost reductions were on the cards. It is also conducting an urgent review of its outstanding orders from Airbus.
“Ongoing cost reduction is critical for the viability of Aer Lingus in the current difficult market environment,” it said in a statement.
The group’s net cash slumped from €653.9m to €593.6m in the quarter. Whilst the group retains a strong balance sheet, investors have become concerned about the rate of deterioration.
Michael O’Leary, chief executive of Ryanair, which holds a 29.8 per cent stake in Aer Lingus and has had two takeover bids rebuffed, warned that Aer Lingus would “run out of cash in two years. Then it will have to come back to shareholders for more money”.
Average fares on short-haul flights fell 1.6 percent in January and February but then slumped 23.6 percent in March, bringing the quarter down 10.8 per cent year-on-year.
Total revenues dropped 16 percent in the quarter while passenger numbers fell 5.7 percent on short-haul and 12.5 percent on long-haul flights. The airline cut short-haul capacity by 4.5 percent and long-haul capacity by 19.5 percent in an attempt to tackle the collapse in demand.