* H1 operating loss of 27.8 mln eur, vs 19 mln year-ago loss
* CEO says more positive about H2 profit on strong bookings
* Airline focusing capacity on higher-margin routes
(Adds details on bookings growth, pension deficit)
By Conor Humphries
DUBLIN, Aug 31 Irish airline Aer Lingus
said strong bookings for the second half of 2011 meant it would
recover from a first-half loss to post a full-year operating
The airline posted an operating loss of 27.8 million euros
($40 million) for the first six months as higher average fares
per passenger failed to make up for lower passenger numbers and
a 15 million euro loss from an industrial dispute.
But it said it would post a full-year operating profit in
the region of 21 million to 22 million euros, in part by
focusing capacity on bringing passengers to Ireland from
faster-growing parts of Europe, like Germany, Belgium and the
The number of tourists visiting Ireland rose more than 15
percent in the second quarter from a year ago as high profile
visits by Britain's Queen Elizabeth and U.S. President Barack
Obama helped paint the country in a positive light.
"We are seeing strong growth inbound which is in some way
compensating for a flat performance ex-Ireland," said Chief
Commercial Officer Stephen Kavanagh.
Aer Lingus earned 55 percent of its revenues from inbound
traffic, up from less than 50 percent three years ago, he said.
The airline increased its average yield, or fare, per
passenger in the first six months by 8.4 percent on a year ago
by focusing its capacity on higher-margin routes.
"They are showing good discipline on costs, that they can
still push through yield increases," said Brian Devine, an
analyst at NCB stockbrokers in Dublin, who said the results were
ahead of expectations.
Shares opened up 8 percent at 64.5 euro cent and were
trading 7 percent higher by 1340 GMT. The share price has fallen
41 percent since the start of the year compared with a fall of
12 percent in the broader Irish market, due in part to concern
about its large pension obligations.
Ryanair, which has a lower cost base and less exposure to
the Irish market, has seen its share price fall 17 percent in
the same period.
Average passenger yields at Aer Lingus are likely to remain
broadly flat in the second half of the year, with most growth
potential in increasing volumes, Kavanagh told journalists.
Aer Lingus' booking profile for the second half of 2011 was
better than expected with single-digit percentage increase
compared to last year, Kavanagh said.
"We are far more optimistic now that at the end of quarter
one," CEO Christoph Mueller said.
Revenue was up 5.8 percent in the first half from a year ago
and Mueller said he expected that rate to continue in the second
Chief Financial Officer Andrew Macfarlane said he expected
an increase in the consensus forecast for operating profit for
the year, which he said was currently around 21-22 million
Cost savings under the company's Greenfield programme would
reach 80 million euros by the end of the year, Macfarlane said.
The company will then focus on adapting its business model
to match the seasonality of its business by asking staff to work
more in the summer period and seeking to lease out planes in the
The trustees of Aer Lingus' pension scheme, which has a
deficit of 400 million euros, are to decide in the coming months
whether to cut benefits, which could cause an increase in the
risk of industrial action, Macfarlane said.
Aer Lingus has received legal advice that it has no
obligation to fund any shortfall, but a legal challenge to this
position is possible, he said.
The operating loss before exceptional items of 27.8 million
euros compared with a loss of 19 million in the same period last
($1 = 0.693 Euros)
(Reporting by Conor Humphries; Editing by David Holmes and