Fuel costs spell trouble for Aer Lingus profits

Aer Lingus has announced that it will be generating a loss this year, due to the increasingly heavy burden of fuel prices which is affecting the entire commercial aviation industry. According to an update on the Irish flag carrier’s financial situation, Aer Lingus lost over €20 million during the first half of the calendar year and it appears likely that the company will dip even further into the red during the final months of 2008. This dire economic situation almost certainly means that Aer Lingus will have to look into implementing potentially painful austerity measures, such as major staff cuts.

According to a report in The Telegraph, Dermot Mannion, the Irish airline’s chief executive officer, said that “at best” Aer Lingus might manage to break even during the second half of 2008, but it is probably more likely that the carrier will continue to generate losses. In any case, it appears all but certain that the Irish flag carrier will close the year in the red. Mannion recognized that fuel prices have decreased somewhat over the course of the past few weeks, but the airline’s main problem is that in order to remain competitive, it must still sell tickets at fairly low prices, especially on European routes where it faces much competition from Ryanair and easyJet. Additionally, economic fears mean that demand for air travel appears to be stagnating throughout much of Europe. Aer Lingus’ current losing streak is in stark contrast to the airline’s financial situation only a year ago, when it turned a profit of €7 million during the first six months of 2007.

Thank you to Peter Taylor of The Telegraph for the initial report.

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