Aer Lingus expects to break even this year; SAS and Iberia slump

European airline shares declined again on Tuesday (24-Aug-2010) as wider markets fell to a one-month closing low. Airline shares were also down on reports of net losses from Aer Lingus and Air Berlin.

In key markets, UK’s FTSE (-1.5%), Germany’s DAX (-1.3%) and France’s CAC (-1.8%) plummeted on disappointing housing data from the US and poor corporate earnings.

Aer Lingus expecting to break even this year

Aer Lingus fell (-2.2%) after reporting a net loss of EUR20.8 million for 1H2010, compared with a loss of EUR81.7 million in the previous corresponding period. However, the airline reported a net profit of EUR15.4 million for 2Q2010, compared with a net loss of EUR13.8 million in 2Q2009.

CEO Christoph Mueller attributed the improved performance to strong unit revenue growth coupled with a significant improvement in the carrier’s cost base. He added that despite the result, the group remains committed to implementing all aspects of its "Greenfield Cost Reduction Programme", "to position Aer Lingus for a successful future".

For FY2010, Aer Lingus now expects to report an operating performance (before exceptional items) of no worse than break-even. For FY2011, Mr Mueller stated it is too early to provide firm guidance, with yields and passenger numbers dependent on the economic outlook.

See related CAPA Profile: Outlook, Forecasts, Guidance

Bloxham Stockbrokers stated in a note that the carrier’s operating performance and “very strong” balance sheet shows a carrier “undergoing a fast recovery from the depths of 2009”.

Aer Lingus CFO Andrew Macfarlane, meanwhile, stated that due to its improving performance, there is “no reason why we shouldn't be able to remain independent”, adding that it may join one of the global alliances over the longer term.

See related CAPA Profile: Global Alliances

Also during trading, Aer Lingus' cabin crew union, Impact, announced the suspension of planned industrial action following an arbitration ruling by the Irish Labour Relations Commission. Impact is now considering the arbitration decision. The LRC recommended a revision of existing agreements in order to meet the objective that cabin crew fly 850 hours per year. Impact had been planning industrial action to protest unilateral changes to cabin crew rostering by Aer Lingus, aimed at saving EUR97 million.

Air Berlin reports net loss

Air Berlin (-1.7%) was also down, after the LCC reported a net loss of EUR56.9 million for 2Q2010.

See related report: European airline shares weaker; Air Berlin reports net loss in second quarter

Elsewhere, Turkish Airlines (+2.6%) and Dart Group (+0.4%) were the only carriers to gain for the day, with Turkish Airline shares benefiting from the carrier reporting a 181% increase in net profit for 1H2010 the day before.

SAS (-5.8%) slumped, followed by Iberia (-3.5%) and British Airways (-3.4%).

Europe selected airlines daily share price movements (% change): 24-Aug-2010