If you take the 79m profit in the latest results add it to the 30m or so loss for last year then its over a 100m swing. About 20-30m will be from staff savings on an annualised basis. The rest is as a result of someone waking up and realising that flying half full flights into the same city in on the East coast of the US is barking mad when you can cut the frequency and combine loads. Setting up LGW without conducting any due diligence and going toe to toe with Easy is lunacy so get the aircraft out of there. And then there is some improvement in yields eg: you paying more to check in bags, buy a coffee etc.
Remember this time last year we were all being told that the company was going to go bust, 139 pilots were going to be sacked is what the company wrote to the Minister in accordance with its legal requirements.
The €79 million Operating Profit is for Q3, 2010 whilst to the 30 September 2010, the full year
Operating performance was profitable to the tune of €60 million. The reduction in the cost base to date has been responsible for 37% of this performance. It seems to me that whilst the frontline staff (including pilots, cabin crew) have given so much, there is a delay in the implementation of cost reductions and implementation of synergies across the back office functions. The implementation of the new IT platform and system for example certainly appears to be running behind schedule.
There is a clear adverse labour efficiency planning variance when compared with what was announced as a standard earlier in the year.
The annualised value of this year's
actual cost savings will be approximately €35.6 million - very significant indeed.
Gross cash is now valued at approximately €0.95 Billion. Whilst being exceptionally robust, this is somewhat overinflated presently by a positive cash inflow generated from a S/LB agreement on one A320 during this year. Equally, Aer Lingus has in excess of €105,000 Net Cash on hand per employee.
Full year performance, all else being equal, shoud be operationally profitable. Exceptional items, including the Volcanic Ash crisis cost provision, will once again have an influence on this in determining the net performance for the year. The frontline staff mentioned have given up a huge amount to secure this outcome and into 2011, we need to see a full organisational wide implementation of all proposed cost reductions.
There is at least a 30% chance that the revenue environment for Aer Lingus will be flat or worse in 2011, as domestic demand in Ireland remains severely constrained. Increased operating costs from airport charges increases will also squeeze the overall performance.
The majority of EI's bases outside of DUB/SNN/ORK have never been fully profitable on a constant basis. They have been,
operationally profitable. However, when the relevant overheads are apportioned to the bases, some of them are in fact loss making. It would be interesting to see LGW specific data.
Well done to all of the EI staff concerned who have each made difficult individual contributions to turn around the airline's performance.
EI Premier