Aer Lingus restores 2014 target after strong 2Q as departing CEO focuses on labour relations legacy

Aer Lingus grew its 2Q2014 EBIT by one third as strong trading helped to offset the impact of strike action (actual and planned). Double digit capacity growth on the North Atlantic, reflecting new routes and increased frequencies, was the main driver of revenue growth.

Although Aer Lingus estimates a strike-related forward booking gap of EUR10 million into 2H2014, current trading is healthy and late summer forward bookings have seen some recovery. This has prompted the company to restore its previous guidance that FY2014 EBIT will be at least in line with last year, after lowering it in Jun-2014 due to the industrial action.

Nevertheless, the future growth and sustainability of profits will require cost savings and Aer Lingus' CORE programme will be vital. The industrial relations backdrop remains difficult, not least because of the lack of a full resolution to the pension funding issue. Discussions on this have been ongoing for most of CEO Christoph Mueller's five year tenure. His departure in May-2015 was recently announced and he will surely not want to bequeath this issue to his successor.