Aer Lingus part 1: N Atlantic has led growth. Taken over as IAG's star after first full year

Premium Analysis

2016 was Aer Lingus' first full year under IAG ownership, following its acquisition on 18-Aug-2015. This first part of CAPA's report on Aer Lingus considers its capacity growth and financial performance. Part 2 will compare its North Atlantic network and its unit cost in the light of its aim to be the leading value carrier across the North Atlantic.

IAG has largely reinforced the strategic path already adopted by Aer Lingus. Its North Atlantic led capacity expansion has accelerated, with trans Atlantic seat numbers growing by a half from summer 2014 to summer 2017. On short haul capacity has grown very little, but load factor improvement has driven traffic growth (important for long haul feed).

Aer Lingus suffered from a fall in unit revenue in 2016, but continued with a trend of improving profit margin that had begun in 2014, thanks to falling unit cost. Lower fuel prices played a role in CASK reduction in 2016, but so too did ex fuel unit cost, including labour productivity. Aer Lingus had the second lowest return on invested capital in IAG when it joined the group, but has risen to be its best performer on this measure. Cost will be key to its maintaining superior returns.

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