Aer Lingus 2014 Annual Report Download - page 23

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21
Operating costs (€ million unless otherwise stated)
2014
2013
% increase/
(decrease)
Fuel costs
378.1
357.3
5.8%
Staff costs
300.6
277.4
8.4%
Airport & en-route charges
376.7
359.4
4.8%
Other operating costs
429.5
369.9
16.1%
Total operating costs
1,484.9
1,364.0
8.9%
Operating cost per ASK (€ cent)
7.29
7.22
1.0%
Fuel costs
Fuel costs increased by 5.8% to €378.1 million (2013: €357.3 million) driven by an 8.1% increase in fuel uplift (in metric tonnes). This was
offset by favourable price movements with the average blended fuel cost per metric tonne (excluding into-plane fees) decreasing to $975 in
2014 compared with $1,001 for 2013. In addition fuel costs were affected by a relatively weaker US$ in 2014 compared with prior year (i.e.
2014 average full year rate of US$1.34 versus US$1.32 in 2013).
Staff costs
Staff costs increased by 8.4% compared with prior year driven by additional 151 FTEs on average in 2014 compared to 2013. This increase
in FTEs primarily related to 119 additional cabin crew and pilots required to support transatlantic activity as well as additional staff required
to support our contract flying operations.
In conjunction with the IASS solution, Aer Lingus has negotiated certain employment cost stabilisation measures which will provide Aer
Lingus with a measure of stability for its non-pilot employment cost base in the period from 1 September 2013 until 31 March 2017. Under
these arrangements, annual salary increments and annual salary inflation will not be payable to non-pilot staff in 2014, 2015, and 2016. As a
result, any annual salary increments and annual salary inflation payable from 1 April 2017 onwards will be calculated by reference to a lower
staff cost base than would otherwise be the case in the absence of employment cost stabilisation measures. Staff are entitled to receive once-
off stabilisation payments.
In 2014, the first of these stabilisation payments (amounting to €2,250 per eligible employee and relating to the period from October 2012 to
December 2014) was paid totalling €9.3 million. In each of the years 2015 and in 2016 stabilisation payments of €1,800 per employee will
be paid.
Finally these increases were offset by €4.9 million cost reduction associated with the 137 employees who left Aer Lingus in 2013 and 2014
under a voluntary severance scheme.
Airport and en-route charges
Airport and en-route charges increased by 4.8% to €376.7 million in 2014 due to combination of factors. These include a 12% increase in
London Heathrow charges as well as increases in charges at other airports. Other factors include the full year impact of 2013 airport price
increases, higher custom and border pre-clearance fees associated with increased volumes in Dublin airport, additional handling charges
associated with the Group’s expanded transatlantic service and the impact of a stronger GBP relative to euro.
Other operating costs (€ million)
2014
2013
% increase/
(decrease)
Maintenance costs
71.6
68.4
4.7%
Depreciation
90.0
82.9
8.5%
Aircraft operating lease costs
65.7
45.2
45.4%
Distribution costs
54.2
47.0
15.3%
Ground operations and other costs
152.9
127.0
20.4%
Other (gains) net losses
(5.0)
(0.6)
n/m
Total other operating costs
429.5
369.9
16.1%
Maintenance
2014 maintenance costs increased 4.7% to €71.6 million due to the full year costs associated with the ACMI contract flying operations for
Virgin and Novair. These were offset by reduced de-icing costs as a result of more favourable weather in Ireland and Europe in 2014
compared with 2013.
Depreciation
The 8.5% increase in depreciation in 2014 compared with 2013 is mainly associated with depreciation of the fit-out of the Boeing 757
aircraft of approximately €1.7 million (not in operation in 2013) and depreciation associated with increased IT capital expenditures in recent
years.
Aircraft operating lease costs
2014 aircraft operating costs increased by 45.4% mainly driven by the three Boeing 757 aircraft deployed since April 2014 on “damp leases”
which are being utilised as part of the transatlantic expansion and the lease costs associated with the aircraft for the Virgin Little Red
contract flying operation. These increases were partly offset by a more favourable US$ exchange rate in 2014 compared with 2013 on a full
year average basis.
Distribution costs
Key drivers of increased distribution and advertising costs in 2014 included: