AER LINGUS has told the market that it will continue to incur losses next year after stating that its operating loss in the current period will come in about €20 million, a sum at the lower end of a range of up to €30 million mooted in an earlier forecast.
The airline said trading conditions next year will be made worse by the Government's decision to impose at €10 departure tax on outgoing flights from Ireland next March.
In an interim management statement, the airline said that the measure will cost €30 million as it will have to absorb the tax on 75 per cent of bookings.
A spokesman for Minister for Finance Brian Lenihan, who holds 25.1 per cent of the airline for the Government, said in response that the Irish tax was "not unique", adding that similar taxes were imposed in Britain, The Netherlands and Australia.
Aer Lingus faces strike action by staff in less than a fortnight over its latest cost-cutting plan. The company's statement, issued before the National Implementation Body invited all sides in the dispute to talks today, stressed its intention to proceed with the rationalisation plan next month if there are no alternative proposals to deliver the same savings.
"Operating at a financial loss is not sustainable. Aer Lingus must now deliver the required level of cost-saving measures to ensure the group is well positioned to grow revenue and profitability into the future," the airline said.
"The airline industry is facing an exceptionally tough trading environment which has progressively deteriorated throughout 2008. Falling consumer demand in Aer Lingus's key markets is, and will continue to contribute to sustained and significant fare pressure.
"Against that backdrop, Aer Lingus expects the average fare trend for full year 2008 to be in line with previous guidance for a 6 per cent to 7 per cent year-on-year reduction on short-haul and a marginal increase on long-haul."
Shares in the airline - down almost 46 per cent in the past 12 months - closed one cent higher in Dublin last night at €1.20.
Davy analyst Stephen Furlong said in a note that the statement covering trading in the January-September period was "broadly in line" with expectations.
"Notwithstanding likely strike action, the shares in Aer Lingus continue to be cheap (this seems to be a never-ending phenomenon), and it is possible that the airline could soon become again a 'restructuring' or 'take-out' play," Mr Furlong said.
The airline will cut its long-haul fleet next summer to eight aircraft from nine, a move that will "result in a reduction of capacity on a number of long haul routes". This follows a reduction in winter long-haul capacity of 11 per cent and a 1 per cent cut in winter short-haul capacity.
"While fuel prices have declined recently, price reductions are being offset by a strengthening of the US dollar, which has appreciated 18 per cent relative to the euro since mid-July," the airline said.
The company has extended its fuel hedging for the three months to December to 97 per cent, at a rate of $1,086 per tonne and for 2009 to 64 per cent at a rate of $995.
Revenues between January and September rose 8.5 per cent on 2007. Flown passenger numbers rose 9.7 per cent to 7.7 million.
