Aer Lingus 2008 Annual Report Download - page 6

AER LINGUS GROUP PLC - ANNUAL REPORT 2008
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SHORT HAUL
prestigious “Airline of the Year” award, while our Irish Sales
team picked up the “Airline of the Year” award at the Irish
Travel Trade News Awards. In addition, we have recently
been voted ‘Best Short Haul Airline’ and ‘Best Long Haul
Airline’ at the Irish Consumer Travel Awards, 2009. Well
done to all.
Outlook
It is clear that consumer confidence in our key markets
is expected to remain low during 2009. In particular the
Irish market, which has been the bedrock of Aer Lingus’
business, has been particularly hard hit by the rapid
decline in our economy and the significant increases in
unemployment. These conditions have been exacerbated
by the imposition of a tax of €10 per departing passenger
and by the recent supplementary budget in Ireland.
These factors will put continued pressure on our ability
to maintain our revenues in the current year.
While we expect the trading environment in 2009 to be
more challenging than in 2008, our business model and
our market penetration remain strong. We expect to have
a materially larger operating loss in 2009, primarily as
a result of the continuing decline in fares necessary to
maintain volume. The benefits of our initiatives on cost
reduction, both in staff and non-staff costs, will underpin
our performance and will be vital for our future. And we
realise that more is required. Against the backdrop of a
severe deterioration in operating conditions, the Board
is taking the steps necessary to safeguard the long term
viability of the Group. In addition to management changes
recently announced, the Board remains resolute in its
objective of reducing operating costs and retaining a
strong capital structure. Ongoing cost reduction is critical
for the viability of Aer Lingus in the current difficult market
environment, and the Board is reviewing the range of
options to deliver a sustained reduction in operating
costs to align its cost base with the Group’s current
and expected revenue stream.
Since the IPO in 2006, we have focused on transforming
Aer Lingus from a legacy Irish business to a modern
international airline. We have made significant progress
towards this objective with the establishment of two
international bases and a range of long-haul partnerships,
which include Aer Lingus’ first non-Irish routes. While
Ireland is likely to remain a core element of the Aer
We are bringing our overall long haul product
specifications into line with our new aircraft. An A330
interior retrofitting programme is now well underway. From
the summer of 2009 seven of our long haul aircraft will
provide an improved product, including new seating and
state of the art in-flight entertainment.
During the year we made further progress with our partner
JetBlue, adding Boston to New York as connecting points
for Aer Lingus customers wishing to travel beyond these
gateways. The new code share partnership with United
Airlines also got off to an encouraging start, prompting both
partners to evaluate closer ties in the future. In January,
Aer Lingus and United announced the launch of a daily
service between Washington and Madrid from the summer
of 2010, to be operated by an Aer Lingus aircraft and
capitalising on the opportunities provided by Open Skies.
This is significant as it is the first time that a European and
a US carrier have joined forces to launch such a service.
We are evaluating the potential for further joint route
developments and closer ties with United in the future.
In 2008 further progress was made in re-aligning
the company’s cost base to the new realities of the
marketplace. Agreement was reached with employee
unions on achieving a targeted €50 million in annual saving,
starting in 2009. An additional €24 million was targeted in
non-staff cost savings and, following an intensive tendering
process, we selected a number of new maintenance
suppliers who are providing us with real benefits and
savings. These initiatives illustrate our continuing need
and drive to achieve cost savings across the business.
However, Aer Lingus’ unit costs are still high compared to
some of our competitors and there is an ongoing need to
make the airline more efficient. This will continue to be a
management priority.
While we faced significant challenges in 2008, our staff
continued to deliver a quality product to our customers
every day. One of the main reasons our customers prefer
to fly with us is because of the quality of our people. The
tremendous loyalty and commitment shown by Aer Lingus
staff, combined with their care for our passengers, sets
us apart from the rest. In 2008 this commitment was
recognised by several external parties, with the Aer Lingus
In-flight sales team picking up a number of accolades at the
International Sales Person of the Year awards, including the