Aer Lingus has posted an operating loss of €22.3 million for the first six months of 2008, down from an operating profit of €2.6 million last year, as rising fuel costs took their toll on the airline.
The airline's chief executive Dermot Mannion warned that it would have to implement “further fundamental changes” in its operating cost base in order to minimise losses in 2009 and to help ensure the long term viability of the business.
“The seasonally weaker first half has been marked by extremely difficult market conditions in the form of unprecedented fuel costs, slowing economic growth in our main markets and a weakness in dollar and sterling,” said Mr Mannion.
Fuel costs rose by €56.5 million, an increase of nearly 50 per cent on 2007, the airline said.
“Fuel is the most significant cost within the business and the €56.5 million increase in our first half fuel costs contributed significantly to a loss of €22.3 million," said Mr Mannion. "The company has 70 per cent of its estimated fuel requirement for the remaining four months of 2008 hedged at a rate of $1,137 per tonne and a 20 per cent of its 2009 requirement hedged at a rate of $1,165 per tonne.”
This approximately equates to a hedging rate of $113 a barrel for the next four months and $116 a barrel for next year.
The unprecedented cost of fuel and the difficult operating environment will continue to have a significant effect on the financial performance of the business and that there will be sustained fare pressure over the medium and longer term, he said.
“Even with the reduction in fuel prices over the last few weeks, competitive pressure on fares and volumes will continue and we are at best expected to break even in the second half, delivering a loss for the full year,” said Mr Mannion.
The airline recorded overall revenue growth of 10.2 per cent to €632.9 million in the first half of the year and said that total passenger revenue was up by 10.4 per cent to €606.2 million. It said that the number of passengers carried rose by 460,000, a rise of 10.5 per cent.