28 August 2009

Outlook for Aer Lingus is "highly uncertain" as the Company reports increasing Losses

The management of Ireland's national 'flag carrier' Aer Lingus says that "the outlook for the airline is highly uncertain" in light of the latest financial results. Their losses have tripled to now € 93 million in the first half of this year.

After taxes the net loss in the first six months of 2009 more than tripled to now € 73.9 million (compared with a net loss of € 21.6 million for the same period of last year), while revenues were down over 12% on the back of lower passenger fares and cargo fees.

In a company statement Aer Lingus said that it is "not in a position to give guidance for the full year at this time".

The company also announced that it can no longer afford to pay what is described as 'legacy-style' rates to its staff.

Aer Lingus' Chief Financial Officer Sean Coyle stated that the company's board has "a tough job, but believes the airline can be made successful as an independent entity as it undertakes an exhaustive and wide-ranging examination of its operations and commercial focus".

This is nice boardroom lingo, the new language big companies and their representatives use these days to confuse the rest of us, the normal people who speak proper English.

But what does it actually mean?

"Clearly we can't sustain operating losses of these levels, we can't sustain the kind of cash burn we've had in the first half of the year, and we need to rebase our cost structure to live with the lower fares that our passengers are prepared to pay," Sean Coyle explained in a second attempt.

Well, this is a lot clearer, although I still wonder what it means "to rebase our cost structure"...

Perhaps it means just to spend less money, and maybe Aer Lingus should start doing that from the top down. Their directors are still overpaid, and even more so in light of the now revealed disastrous company results.

No bank is prepared to lend money to an airline that is burning about € 400 million of net cash in a 12-month period. Not even the Irish banks that brought us the 'credit crunch', recession and national finance crisis.

"We have to come up with a cost plan to stabilise our position. Nothing is ruled out at this time," Sean Coyle emphasised.

I wonder if he and his fellow directors have thought of reducing the number of their flights and aeroplanes, to match an obviously shrinking market. The idea that anyone can fly to anywhere for next to nothing and for no particular reason is ludicrous. It ruins the rest of the ozon layer that is left by now, and does further damage to our planet.

Education has to do its part to bring the message home, and governments - not only the Irish - have to play their part as well, first of all by imposing normal fuel taxation on aircraft fuel, which is still - and for no good reason - tax-free.

Too many people still fly to too many destinations, for no real reason. Holidays can be spent in one's own country as well as abroad, and if someone really feels the need to go to other countries, we still have very good and reliable ferry services.

The financial crisis of Aer Lingus is only the tip of the proverbial iceberg. It shows that airlines and air travel as most people know them are no longer viable and sustainable. I have seen this a long time ago and not used any airline or commercial flight for more than 20 years.
It is time now for everyone to wake up, see the light and accept reality.

If we allow ourselves - and the airlines - to stay in cloud-cuckoo-land, the crash that will happen in due course will be at least of the same dimension as the recent collapse of the banks.

Good Morning, Ireland! Good Morning, World!

The Emerald Islander

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