Aer Lingus profits soar 15%, but parent’s shares nosedive

By Geoff Percival 

Aer Lingus increased its profits over 15% last year, with revenues rising by more than 5% as higher fleet capacity enabled it to boost performance. Total revenue amounted to just under €1.86bn for 2017; a 5.3% improvement on 2016 levels.

Within that bracket, passenger revenue grew by 5.4% to nearly €1.8bn and cargo revenue rose 6.7% to €48m, but other ancillary revenues fell 14.3% to €12m.

Aer Lingus’s operating profits rose 15.5%, or €36m, to €269m. The airline’s capacity increased just over 12% last year helped by the introduction of an additional Airbus A330 craft to its fleet and the full-year impact of a number of the same planes delivered to support the airline’s long-haul expansion in 2016.

The airline also achieved “significant” cost savings through “efficient growth with higher productivity and from cost initiatives” in areas such as maintenance, selling and IT.

On a group-wide basis, Aer Lingus’s owner IAG saw a 1.8% boost to annual revenues to nearly €23bn, while operating profits rose 9.8% to €2.73bn.

British Airways is also owned by IAG, along with Spanish carriers Iberia and Vueling. It saw 2017 revenues rise over 7% to nearly €12.3bn and operating profit increase 19% to €1.75bn.

“All our airlines performed extremely well with their best-ever individual financial results,” said IAG chief executive Willie Walsh.

However, while IAG expressed confidence about its outlook for 2018 a 5.6% year-on-year fall in group fourth quarter operating profit, to €585m, sent its shares down by nearly 6%.

It also pledged more cash for shareholders via a share buyback programme.

IAG said it expects its group operating profit for 2018 to show a year-on-year increase, if current fuel prices and exchange rates persist.

A proposed final dividend, of 14.5c per share, brings the full-year dividend to shareholders to 27c per share. The group returned €1bn to shareholders, via buybacks and dividends, in 2017 and plans another €500m share buyback this year.

“Our confidence in IAG’s future remains undaunted,” management said.

“The important thing for us, which I think sets us apart from a lot of our competitors, is we’re looking at [capacity] growth of 6.7% but with unit revenues improving off the back of that growth,” Mr Walsh said.

However, some analysts were not convinced. “IAG’s outlook for a positive unit revenue environment in 2018 runs counter to our own analysis of the current sector outlook,” Bernstein analyst Daniel Roeska said.

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