Aer Lingus to curtail short-haul expansion
Aer Lingus owner IAG is to cut back expansion of its short-haul services next year as the global economy continues to weaken.
Group chief executive Willie Walsh said the move would span all of IAG’s brands — which also include British Airways, and Spanish carriers Iberia and Vueling.
Mr Walsh said, however, that IAG would continue to grow Aer Lingus’ transatlantic business, performance of which this year has been very pleasing he said.
More North American routes are likely to be announced towards the end of next year, following the launch of a new service from Dublin to Montreal, which had already been announced but was delayed due to slow delivery of a new plane order from Airbus.
Mr Walsh was speaking on the back of IAG posting a third quarter pre-exceptional operating profit of €1.42bn; down 7% year-on-year, and dented by as much as €155m by the cost of pilot strikes in the UK.
For the first nine months of the year, IAG saw revenue increase by nearly 6% to €19.4bn, but operating profit after exceptional items tumbled by 25% to €2.52bn.
Mr Walsh called the underlying third-quarter performance “good” against a backdrop of industrial action and significantly rising fuel costs. In the quarter, IAG’s fuel bill increased by €136m.
British Airways pilots went on strike for 48 hours last month, grounding 1,700 flights in a dispute between UK pilot union BALPA and the airline over pay.
The pilot walkout was the first in the airline’s history. No further strike dates have been scheduled, but the union said it retained the right to announce more.
IAG has also faced disruption at airports. Strikes by ground staff at its Iberia airline, which also serve its Vueling brand, have disrupted flights in Barcelona.
Mr Walsh said he has no worries over the industrial relations outlook, adding that threatened industrial action by Heathrow staff had also had an impact, even though those August strikes did not go ahead.
IAG said it expects its 2019 operating profit, before exceptional items, to be €215m lower than 2018, reiterating a September profit warning.
Analysts at RBC said the pilot dispute could overshadow holiday trading at Christmas.
“Until BA’s dispute with its pilots is... settled there is scope for further material disruption and subsequent profit downgrades (over) the key Christmas travel period,” RBC said in a note, though it added that a “lack of new strike date announcements is encouraging”.
IAG doesn’t break out individual earnings figures for its brands on a quarterly basis, but Mr Walsh said Aer Lingus’ third-quarter operating margin remained strong, albeit slightly down, at 24.5%.
He said margins were being eroded by a strong 2018 comparison period, the weakening global economy, and increased fuel costs, but said there remains opportunity for growth.
Mr Walsh also said last week’s cut in Irish airport charges for airlines by the Commission for Aviation Regulation was “on balance, a fair and good determination”.
