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4
Annual Report 2010
Chief Executive Offi cer’s review Aer Lingus Group Plc
Dear fellow shareholders,
2010 was my fi rst full year as CEO of Aer
Lingus and it has been a year of both
challenges and successes.
At fi rst glance, 2010 appears to have been a
particularly diffi cult year for Aer Lingus. Our
operations were impacted at various times
during the year by snow, ash and several
airspace closures. European air traffi c was
severely disrupted in the fi rst half of 2010 by
the volcanic eruption in Iceland. In addition,
the heavy snowfalls experienced in late 2010
signifi cantly impacted our operations as we
approached the crucial Christmas period.
We continued to experience diffi cult economic
conditions in our key Irish market.
Unemployment remains high at approximately
15% and passenger numbers in Dublin Airport
declined by approximately 10% in 2010.
In addition, the economic and fi nancial
uncertainty experienced in the second half
of 2010 also took a toll on our bookings.
However, the story of 2010 should not focus
solely on these diffi culties. 2010 was the year
in which Aer Lingus showed how it could
respond to these headwinds and demonstrate
the true calibre of its people and operations.
Most signifi cantly, Aer Lingus returned to
profi tability in 2010 following 2 years of
operating losses with an operating profi t
(before exceptional items) of €57.6 million
for the year.
It was gratifying to see that the corrective
actions which Aer Lingus initiated in 2009
have delivered results in 2010.
Cost reduction programme
The continuing implementation of the Cost
Reduction Programme was a key management
objective in 2010 and I am satisfi ed to say
that we made solid progress since work
initially started on the Programme in 2009.
Although the Group experienced a slight delay
in implementing parts of this Programme, it
still achieved annualised staff and non-staff
cost savings of €50.0 million and €3.9 million,
respectively.
We are very appreciative of the support
we received from our staff and their
representatives, which has enabled us to
deliver the targeted savings for 2010.
Aer Lingus remains committed to generating
total savings with an annual value of €97
million.
Shannon services
Aer Lingus remains committed to maintaining
transatlantic fl ights from Shannon, where the
airline has long operated services. However,
the long haul winter element of these services
have been loss making for several years and, in
2010, reached a point where they threatened
the viability of the entire Shannon operation.
It was for this reason that management took
decisive action to address the loss making
element of these services in order to ensure
the continuation of transatlantic fl ights to and
from Shannon for the remainder of the year.
We continue to build our network from
Shannon airport and now provide the Shannon
region with a total of 8 destinations from
Shannon airport including new services to
both Paris and London Gatwick.
Progress in 2010
Our progress during 2010 was not just about
managing costs and reducing losses. During
the year, we also took some important steps
in the ongoing commercial and operational
evolution of Aer Lingus.
We have now fully transferred our operations
from Terminal 1, which has been our home for
the past 38 years at Dublin, to Terminal 2. This
move will help raise our already high standards
of service to new heights and will provide a new
home for Aer Lingus in Dublin for the next 50
years and beyond. The Aer Lingus brand is rooted
in friendliness, innovation and professionalism
and Terminal 2 is a perfect fi t with these values.
We have completely refurbished our Gold Circle
lounges in both Dublin Airport’s Terminal 2
and London Heathrow. The re-design draws on
Aer Lingus’ Irish heritage in a contemporary
style. The lounge’s service offering has also
been enhanced with improved catering and
internet connectivity for Gold Circle members.
Aer Lingus also improved its relationships
with existing partners in 2010. We established
a new and successful Aer Lingus Regional
franchise concept with Aer Arann in March
2010. We have stood with our partner despite
the diffi culties that they experienced during
2010 and we are satisfi ed that the franchise
agreement continues to provide mutual benefi ts
for both parties as well as signifi cantly
improving connectivity for our passengers.
The agreement with Aer Arann signifi cantly
increases Aer Lingus’ presence in the
Ireland-UK market in addition to new seasonal
services to the Channel Islands and France. The
concept is improved on an ongoing basis with
new routes coming on-stream in 2011.
Chief Executive Offi cer’s review