Operating Loss of €50.4m In 2001 Following

31st Jul 2002

Aer Lingus Group p.l.c., today announced a Group operating loss of €50.4 million for the year ended 31 December 2001 compared to an operating profit of €79.9 million in 2000. The operating loss for 2001 was €27 million better than forecast in the Survival Plan due to the early and comprehensive implementation of measures in the Plan.

The loss for the year, after net exceptional losses of €104.1 million, is €139.9 million. This compares to a net profit of €71.6 million in the previous year.
Shareholders funds decreased to €223.9 million at 31 December 2001 compared to €363.3 million at the end of 2000 and the net cash position decreased by €169.6 million to €66 million.
Group turnover fell by 2% to €1,347.3 million.
Passenger numbers were 6.6 million a reduction of 4.6% on the previous year.
Commenting on the results Aer Lingus Group Chairman, Tom Mulcahy said:
“The airline industry environment changed dramatically in 2001 particularly in the aftermath of the tragic events of September 11th in the United States. Aer Lingus responded quickly to reduce costs, conserve cash, reduce capacity and stimulate demand through lower fares. The airline`s Survival Plan has now been implemented and, while good progress has been made, much more remains to be done to return the company to adequate levels of profitability. I am confident that, with further necessary change, Aer Lingus can meet the challenges ahead and compete successfully in the future.”
Chief Executive, Willie Walsh said:
“We are continuing our programme of change beyond mere survival to improve our competitiveness and efficiency and to grow our profitability. We will compete by relentlessly reducing our costs and providing lower fares and a quality service to our customers. This is the only way to build a sustainable business for the future. Progress is well underway on further cost reduction of €130 million. Continuing cost reduction and customer service delivery are vital so that we can compete and generate profits through lower fares.”
Dramatic change in 2001:
The airline industry environment changed dramatically during 2001. A number of external factors, including the outbreak of Foot and Mouth disease, worsening economic conditions and, in particular, the tragic events of September 11th in the United States, had a devastating impact on air travel. Aer Lingus reacted rapidly to these negative circumstances. Within weeks of September 11th the Board had approved a radical Survival Plan and implementation was well underway by year end.
The main features of the Survival Plan included:
*Reduction in cost base of €190 million
*Permanent staff reduction of 2,000 (one third of the work-force)
*Radical changes in work practices
*Pay freeze
Progress in 2002:
Building on the greater efficiencies and flexibilities resulting from the Survival Plan, Aer Lingus has made progress towards the goal of creating a sustainable business for the future. In the first half of 2002 Aer Lingus has:
*started five new routes, (Malaga, Barcelona, Nice, Alicante and Faro)
*made over three million low fare seats available at prices up to 60% lower than the previous year,
*reduced distribution costs by increasing direct sales and reducing trade commissions,
*introduced an improved website aerlingus.com. that has increased dramatically the volume of seats sold through this channel. 20% of seats are now being sold through the website compared to 2% this time last year.
*Begun implementation of a further €130 million tranche of cost reduction across all major cost categories.
Aer Lingus has made good progress in 2002 following the implementation of the Survival Plan and the subsequent actions. Aer Lingus is planning further change in reducing costs and fares, generating more efficient usage from its aircraft and opening new routes.
Future outlook:
The air transport industry is continuing to change. Average fares will continue to fall and competition will intensify. Aer Lingus is committed to implementing a new pricing and cost model capable of generating the profit levels needed to develop the business.

Concluding his comments Willie Walsh said:
“We have made good progress since the trauma September 11th but we are not satisfied with mere survival. The Survival Plan was the beginning not the end of change in Aer Lingus. We are becoming more efficient, simplifying the business of getting people to their destinations. We will carry more passengers on more routes with less aircraft in the coming winter season than in the same period last year. This reduces cost for Aer Lingus, reduces fares for our customers and will generate the profits that will sustain the business in the future.”



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