Aer Lingus has released full year 2013 results this morning that are largely in line with our forecasts and previous guidance given by the airline. However, guidance for 2014 is materially weaker than both our forecasts and consensus. For the full year 2013, revenue amounted to €1.425 billion (merrion: €1.436 billion) while operating profit before net exceptional items amounted to €61.1 million (merrion €60.5 million). EBITDAR for the period amounted to €189.2 million (merrion: €189.6 million).
<p>
Passenger numbers carried decreased by 30bps to 9.625 million while the average fare per passenger increased by 1.2% during the year. Broken down by segment, long haul passenger numbers increased by 12.2% with the load factor increasing by .6 points with capacity moving higher by 11.6%. On short haul routes, revenue declined by 3.3% as a warm summer dampened demand while yield competitiveness increased during Q3 and Q4.
<p>
Aer Lingus management have also unveiled a new cost reduction programme “CORE” (Cost Optimisation and Revenue Excellence) which will be aimed at reducing costs by €30 million over the next two years while also boosting revenue generating programmes.
<p>
The Aer Lingus balance sheet continues to be in very good shape with net cash finishing 2013 at €419.8 million (merrion: €440 million). Management are also proposing to pay a dividend of 4c for 2013 and maintain this rate annually thereafter for the “foreseeable future”, matching our forecasts.
<p>
In terms of outlook, management note that the first quarter of 2014 will be weaker than the comparative period in 2013 as a result of market conditions and the timing of Easter. The airline is also providing guidance for the full year 2014, noting that operating profit, before exceptional items is expected to be broadly in line with 2013 (merrion: € 74.7 million). This guidance is significantly below our forecasts (-20%) and also below consensus forecast (-15%) and will likely not be taken well by the market. We will review our forecasts post this morning’s conference call with a clear downward bias despite news of a new cost takeout programme.
<p><h5>David Holohan</h5>
Disclaimer: www.merrion-capital.com/disclaimer
Merrion Stockbrokers Limited (registration no. 307878)
is a limited liability company whose registered office is at
Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.