Aer Lingus believes there is a “compelling strategic rationale and significant benefits” to be had from a £1 billion takeover by British Airways owner International Airline Group.
The update came as the Irish carrier revealed a pre-tax loss of €111.5 million in 2014 against a profit of €39.6 million the previous year.
Operating profits were up by 18% to €72 million as passenger carryings rose by 1.5% to 9.7 million. Total network carryings surpassed 11 million for the first time, including passengers flown by Aer Lingus Regional.
The loss before tax reflects net exceptional items of €180.3 million, primarily related to resolving a pension dispute and staff stabilisation payments of €9.3 million, the airline said.
The airline described its short haul performance as “reslilient” in a “highly competitive environment” despite the €10 million impact of strike action in the first half of the year.
Long haul passenger fare revenue was up by 28.4% with average fares up by 7.2% as transatlantic capacity rose by almost 24%.
The Aer Lingus board reiterated its wiliness to recommend the financial terms of IAG’s offer to shareholders.
A combination with IAG would, according to the carrier:
- Enhance Ireland’s position as a natural hub for Europe on the North Atlantic;
- Accelerate Aer Lingus’ transatlantic, long haul growth plans;
- Grow employment;
- Enhance short haul growth;
- Strengthen Ireland’s connectivity; and
- Provide access to a global cargo network
Aer Lingus said it confirmed IAG’s intentions to preserve the carrier as a separate operating business within the group with its own brand, management, head office and operations.
The Dublin-based carrier’s chairman Colm Barrington said: “Our performance in 2014 was strong, with significant growth in long haul and resilient short haul operations.
“To enhance these excellent results and to accelerate Aer Lingus’ growth, it is the board’s strong belief that the company should now take the opportunity to combine with IAG.
“In this combination Aer Lingus will operate as a separate business while gaining access to IAG’s extensive network and benefiting from its scale.
“These significantly positive benefits will de-risk Aer Lingus’ future, strengthen its operations and enhance the future success of the company.”
Outgoing chief executive Christoph Mueller, who is to head Malaysia Airlines, said: “The year 2014 proved the strength of our ‘value carrier’ business model across both our short and long haul businesses.
“We profitably expanded our long-haul network utilising our cost advantage and favourable geographic position and helped establish Dublin as the seventhth largest European hub for transatlantic connections.
“Our short-haul business continued to demonstrate its resilience despite a highly competitive market. Commercial initiatives, in addition to cost control, led to the highest operating profit since the financial crisis and 17.8% above last year.
“The focus on our business is unabated and in the coming months we will invest in our customer proposition and distribution model in addition to reducing costs.
“Now that the complex pension funding issues have been addressed, we are re-launching our CORE programme, starting with the introduction of a new voluntary severance scheme at the beginning of this year.
“I am delighted to hand the reins to Stephen Kavanagh at the end of this week.
“I know that the entire Aer Lingus team has a lot of work planned for 2015 and I am confident that they will drive further improvements in profitability, customer satisfaction and employee engagement.”