Aer Lingus 2012 Annual Report Download - page 7

CHIEF EXECUTIVE OFFICER’S REVIEW Aer Lingus Group Plc
ANNUAL REPORT 2012
5
Dear Fellow Shareholders,
2012 was an excellent year for Aer Lingus. We made an operating profit
for the year which is 40.7% above 2011. Our operating margin, as a
measure of our competitiveness, has increased to 5.0% with free cash
flow of €75.2 million. EBITDAR of €191.3 million was 10.7% ahead of
2011. Improved processes and service delivery are reflected in a record
on-time arrival performance of 88% and a high customer satisfaction level.
At 31 December 2012, the number of forward passengers booked on our
services was ahead of the figure booked at the same time in 2011 and in
January 2013, we recorded the single highest day of revenue booked in
our history.
191.3
172.8
191.5
57.5
EBITDAR performance (€m)
2012201120102009
I firmly believe that this result, representing our third consecutive year of
profitability, validates our value carrier business model and shows that our
strategy is delivering a leaner, more efficient and profitable airline, to the
benefit of customers, shareholders and staff.
Aer Lingus continues to gain profitable market share from legacy and low
cost carriers by offering a combination of competitive intra-European
point-to-point services, a profitable long haul business focused on our key
markets in Europe and the USA overlaid with competitive connections
worldwide with our partners in Europe, the Americas and the Middle East.
In 2012, we continued to build our network of strong industry alliances,
completing agreements with Etihad and Air Canada. We have also extended
our franchise agreement for Aer Lingus Regional services with Aer Arann.
Our partnership model, driven by our neutrality, has significantly
contributed to the business. In 2012, approximately 23% of our total long
haul passenger traffic either connected from, or to, our partner airline
services (2011: 18.5%), while interlining revenues and passenger volumes
continue to grow, increasing by 8.8% and 5.5% respectively in 2012
compared to 2011.
% Variance
8.8%
5.5%
2011
60.5
789
2012
65.8
832
Passenger traffic trends
Interline revenues (€m)
Interline passengers (‘000s)
Aer Lingus will return to higher capacity growth in 2013 adding one aircraft
on the North Atlantic and four short haul aircraft in co-operation with Virgin
Atlantic out of London Heathrow. This represents an increase of 5.0%
in our short haul available seat kilometres. We will fly one Airbus A330
aircraft during the next two winter seasons, with an option for a further
one, on behalf of a major European tour operator which will improve
aircraft utilisation in the low season. We will also continue to invest in our
IT infrastructure, enabling Aer Lingus to deliver superior customer service
and convenience while driving down overall costs at the same time.
In 2013, the management team will remain focused on creating
demonstrable value for our shareholders. After the successful delivery of
the Greenfield restructuring programme in 2012, resolving the complex
pension legacy and further efficiency improvements across the organisation
will drive the management agenda in 2013.
Commercial developments in 2012
In 2012, we announced a number of new or expanded partnership
agreements and commercial developments:
• The Aer Lingus Regional service, operated by franchisee Aer Arann,
entered into its third year. In March 2012, under an extension of the
franchise agreement, Aer Lingus and Aer Arann announced that all Aer
Arann routes would be operated under the Aer Lingus Regional brand,
thereby increasing the range of destinations offered by Aer Lingus. The
economics of the turbo prop aircraft operated by Aer Arann are more
suitable than jet aircraft for certain routes such as those in the Regional
network. In addition to franchise fees receivable from Aer Arann, we
also benefit from increased traffic from UK destinations connecting to
transatlantic services in Dublin and Shannon. Following on from the
expansion of the Aer Lingus Regional franchise agreement in March
2012, Aer Lingus and Aer Arann agreed a 10 year extension of the
Aer Lingus Regional franchise agreement. The Aer Lingus Regional
franchise continues to deliver significant network and financial benefits
for Aer Lingus.
We also made an equity investment in a new aircraft leasing vehicle which
will acquire eight new ATR72-600 aircraft over the next 18 months and
then lease these eight aircraft at commercial rates to Aer Arann. This
agreement is outlined in more detail below.
• In July 2012, we announced that we had reached commercial
agreement with Etihad Airways regarding interline and codeshare
arrangements. From September 2012, we now co-operate with Etihad
Airways on flights between Abu Dhabi and Dublin and also have full
access to market flights across the Etihad network beyond Abu Dhabi
to points including Australia, Asia-Pacific, the Indian subcontinent and
the Middle East. We are now discussing opportunities to co-operate
with Etihad in areas such as joint procurement for mutual benefit. In
May 2012, Etihad announced that it had acquired a 2.99% stake in
Aer Lingus.
CHIEF EXECUTIVE OFFICER’S REVIEW