Aer Lingus - 5

[EI Premier]

http://www.aerlingus.com/media/aerli...ingus_half_year_report_pe30610.pdf

In summary then - a very positive turnaround in the Aer Lingus performance.

Total Revenue is down slightly HY on HY, but less than the amount by which capacity has been reduced. Equally, Total ancillary revenue is down slightly, but revenue per passenger has increased significantly in the period.

Depending upon the general Macroeconomic environment, I would still target Q2, 2011 as the crucial period in which we should see clear profitability at Aer Lingus.

Going forward, Total revenue is likely to remain relatively stagnated as domestic demand in Ireland remains exceptionally weak compared to pre-crisis levels. However, for the full year Total Revenue will once again exceed €1 billion.

According to the Investor Presentation, a decision from the arbitrator is expected within the next 48 hours and that talks are proceeding at the present.

I think that a ballpark figure for the share price towards the year end would be €1.20.

€1.20 is some distance to go, but if we are to see a continuation of the performance as announced this morning, then I think this is quite possible. With an aim for certainly between €1.10 and €1.20 around the period in which the full year results will be announced.

There's no doubting that EI, as a company, despite having had many changes in the recent past, is in a mature stage and that there is no significant potential for extensive Total Revenue growth. However, based upon the latest performance, I see ample scope for the group to deliver total profits before tax of in equivalence to or in excess of €30 million during the FY 2011 .

Gross cash will quite likely decline during H2, 2010 as we see an increase in outflows associated with the various Greenfield severance packages.

An extremely prudent fuel and currency hedging program is in place at the company and this must be commended. Given the more subdued nature of the global recovery in the recent past, most especially in the United States where the economy is clearly faltering - we should see minimal upward pressure upon oil prices in the next 12 months.

I also noted from the presentation, the clear refences to the immature cost bast at IAD and the potential for at least a second aircraft to be added during next year. This is something which should be watched closely. I note that the base was ''operationally profitable'' - which does suggest that when the appropriate allocation of Fixed Overheads for the period was made that the base was in fact loss making.

The turnaround in the EI performance is significant in terms of the companies listed on the ISEQ index - you only need to take a look at the CRH figures today for example.

This turnaround would not have been possible without many sacrifices having been made by staff across the board at Aer Lingus - which is very commendable indeed.

EI Premier