=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/n/a/2005/04/14/financial/= f051245D18.DTL --------------------------------------------------------------------- Thursday, April 14, 2005 (AP) Aer Lingus Reports Lower Net Profit By SHAWN POGATCHNIK, Associated Press Writer (04-14) 05:12 PDT DUBLIN, Ireland (AP) -- Ireland's slimmed-down state airline, Aer Lingus Group PLC, reported sharply reduced full-year profits Thursday because of the high cost of slashing its payroll, even as it operating results improved. Aer Lingus, which competes head-to-head with no-frills carrier Ryanair, said its 2004 operating profit rose 29 percent to 107 million euros ($138 million) in 2004. But its profit fell 98 percent to just 1.2 million euros ($1.55 million), chiefly because it paid 97.9 million euros ($126.3 million) in severance and early retirement benefits to about 2,000 employees. It also paid 10.7 million euros ($13.8 million) to employees, who hold a 10 percent stake in the business as part of a union-negotiated deal. Executive Chairman John Sharman said the staff cuts were an essential pa= rt of transforming Aer Lingus into what has become the only stable, profitable state-owned airline in Europe. "These actions are geared towards reducing costs and passing on these co= st reductions to our customers through lower fares," Sharman said. "The message to the marketplace is simple. Aer Lingus intends to provide low fares to customers with a service that is way better than the competition." Revenue rose 2.1 percent to 906.8 million euros. Aer Lingus faced the possibility of bankruptcy in 2001, when it was losi= ng more than 1 million euros each day, but rebounded strongly by slashing costs, revamping its route network and modernizing its sales system. So far more than a third of its original 6,000-member payroll has been cut, and plans to prune another 1,000 positions are in the works. The airline's annual report offered no insight into two major unresolved issues: the identity of its next chief executive, and the possibility that the government might float a majority stake of the business on the Irish Stock Exchange. The primary architect of the restructuring program, former Chief Executi= ve Willie Walsh, resigned in January in apparent frustration at the government's rejection of his own proposal for a management buyout of Aer Lingus. Walsh was appointed chief executive of British Airways last month. Sharman refused to comment on whether the airline has identified a single candidate or even compiled a short list of candidates to replace Walsh. The government of Prime Minister Bertie Ahern has spent several years mulling what to do with Aer Lingus. It originally planned to privatize the whole enterprise but retreated when the airline nearly collapsed in 2001. Transport Minister Seamus Brennan has pledged to announce soon whether t= he government will offer a 51 percent share of the airline to the stock market, an idea widely circulating in Ireland's financial press. The uncertainty has undermined Aer Lingus' hopes of buying new long-haul aircraft from Airbus or Boeing. The airline wants to expand its direct services to the United States, which has long been the biggest source of revenues, but has just seven Airbus A330 aircraft for trans-Atlantic services. Thursday's report confirmed that Aer Lingus has rapidly transformed its network and pricing over the past three years, expanding rapidly in continental Europe and imitating Ryanair's successful model of offering low fares sold on the Internet. Today it operates 65 routes from Ireland, compared to 41 in 2001. All 24 new routes are to European destinations. It said the average one-way fare on European routes was 79.70 euros ($102.80), a 23 percent drop from the 2001 average. The airline said its services to the United States — to Boston, Chicago, Los Angeles and New York — generated 39 percent of revenues in 2004. It said the number of passengers on the U.S. routes rose 7.2 percent to 1.2 million, while the average cost of a one-way ticket was 252.67 euros ($325.95), also a 23 percent reduction from 2001. ---------------------------------------------------------------------- Copyright 2005 AP