13th Sep 2013 08:38
LONDON (Alliance News) - Aer Lingus PLC Friday followed Ryanair Holdings PLC in issuing a profit warning, citing a fall in bookings during July and August and fierce competition that is forcing down fares.
The Irish airline said it now appeared that it wouldn't be able to make up for the decline in short-haul bookings it experienced during July and August, while competitive pricing on its routes was hitting the most profitable late bookings made in the same month that the customers fly.
It said it was now expecting that operating profit excluding exceptional items would be about EUR60 million in 2013, down from its previous forecast of being broadly in line with the EUR69.1 million it made in 2012. It said it does expect operating profit in the third quarter to be ahead of last year.
The warning from Ireland's flag carrier comes after big rival Ryanair earlier this month also cut its profit expectations, citing price competition on routes in the UK, Scandinavia, Spain and Ireland. Ryanair, which competes with Aer Lingus on many of its routes, said it would react to the increased competition by reducing its own fares and cutting capacity on selected routes this winter.
In a statement, Aer Lingus said it would cut short-haul capacity by a minimum of 3% in the fourth quarter compared with last year.
Aer Lingus said its long-haul routes, which make up a much smaller part of its business, were continuing to perform well ahead of last year, despite seeing some weakness for November compared with last year. It blamed the weakness in November on a strong performance last year when some travellers had delayed their plans to travel in October as Hurricane Sandy hit the eat coast of the US.
"Long haul bookings for the remainder of 2013 are currently ahead of prior year," it said.
The airline said it is looking at ways to accelerate existing plans to cut costs, but warned that employee exits under the current voluntary severance scheme have been slowed by delays in the resolution of funding issues in its pension fund.
The airline had blamed the fall in short-haul bookings during July and August on good weather in Ireland keeping potential travellers at home, but says now it thinks conditions in the market have changed for the worse.
Ryanair has tried to acquire Aer Lingus three times, but was blocked each time by regulators and Aer Lingus shareholders including the Irish government. Europe's largest low-cost carrier was last month ordered by the UK antitrust regulator to sell down its 29.8% stake in Aer Lingus to 5%. The regulator said the stake could give Ryanair undue influence over its competitor and prevent another airline from trying to acquire it in the future.
Aer Lingus shares were down 5.7% at EUR1.495 in London Friday morning.
By Steve McGrath; [email protected]; @SteveMcGrath1
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