Aer Lingus reports new drop in revenues

Embattled airline Aer Lingus today reported a further slide in revenues, but said performance was "stabilising" after efforts to cut aircraft and capacity.

The Dublin-based carrier, which last month unveiled plans to cut a fifth of its workforce, announced it was stripping out another plane from its long-haul service, to trim winter and summer 2010 capacity further.

Revenues fell 9.7 per cent year on year in the third quarter, although the number of passengers rose 7 per cent and the group said it was filling its planes better, with the load factor up across long and short haul flights.

Fares plunged by 17.6 per cent on average in the three months to September 30 as the airline struggled against the consumer spending slump.

But Aer Lingus said the pace of decline in fares had levelled off and an 8.5 per cent hike in sales per passenger on extra charges for short haul flights, such as checked-in baggage and advanced seat booking, also helped.

The group's recently appointed chief executive Christoph Mueller, who joined in September, is leading a major overhaul and cost-cutting drive to steer the firm back to profit.

About 676 staff are being let go and the group is also changing its pension arrangements under the first phase of his turnaround plan, over which it is currently in talks with unions - a process it hopes to resolve by about November 18.

In total, Aer Lingus aims to shave about 97 million euros (£86.5 million) off its annual cost base.

It signalled today that the focus would remain on cost cutting as recession pressures were also hampering the sector's recovery.

"Cost increases in the form of higher fuel prices, airport and navigation charges together with further expected gross domestic declines and unemployment increases in our major markets, will mean that we must continue to reduce any costs within our control so that we can cope with continued falling fares, compete and maintain balance sheet strength," said Aer Lingus.

However, it added that "actions taken to remove capacity on underperforming parts of the network has had a positive impact on stabilising load factors and yields while reducing operating costs".

"While the fall in yield year on year continues, the pace of decline in average fares does not appear to be accelerating currently."

Aer Lingus has been hit by falling fares as it competes with rivals such as Ryanair to attract passengers, while rising fuel costs have also impacted results.

The group reported losses of 93 million euros (£83 million) for the first half of 2009 - almost four times the figure for the same period last year.