Irish airline Aer Lingus, which insisted that it was profitable when it was fending off an unsolicited takeover bid from Ryanair before Christmas, admitted today that it made an operating loss of €18m in 2008 – and is going to make an even bigger loss in 2009. This has enraged Ryanair, which has publicly accused its rival of lying to shareholders and misleading the Stock Exchange. It’s not exactly an unusual occurrence for Ryanair to be furious about something, but this time it might have a decent case for once...
Aer Lingus said today that it made an after-tax loss of €108m last year (after making a profit of €105m the previous year), despite revenues rising 6% to €1.4bn. The airline blamed the profit slump on the rising cost of fuel, which was nearly 60% up on 2007, although its other operating costs also inched up slightly. This led to an operating loss of €18m for the year, forcing Aer Lingus to spend less on staff, suppliers and airport charges. But despite this cost-cutting drive, it’s still expecting passenger numbers to be flat this year – and given that it plans to cut ticket prices by 10% to boost custom, it no longer thinks it can stick to its earlier prediction of making a profit in 2009.
Naturally, this news went down like a lead balloon over at the ever-sympathetic Ryanair. Since it owns nearly 30% of Aer Lingus, Ryanair would be miffed enough at the best of times. But its real beef is that these figures seem totally out of kilter with Aer Lingus’ previous insistence (in a Defence Document on December 22 2008, just ten weeks ago) that it was fully profitable – one of the main ways it persuaded shareholders not to accept Ryanair’s €700m hostile bid. Can Aer Lingus really have expected to finish the year in the black at that stage?
Ryanair boss Michael O’Leary certainly doesn’t think so. Today’s results ‘prove conclusively’ that Aer Lingus misled investors, he said, adding (in his inimitable fashion): ‘It would appear that the Board and Management of Aer Lingus care more about lining their own pockets with excessive and unjustified Director fees and multi million euro resignation bonuses for failed management than they do about growing Aer Lingus, delivering profitability or shareholder value.’ An airline scorned, and all that.
With Ryanair now planning to complain to everyone it can think of, this little spat could get messy. You might understand why Aer Lingus was so horrified by the prospect of a Ryanair takeover - but it won’t be able to use that as an excuse if it’s found to have broken stock market rules...
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