Aer Lingus Cuts Profit Forecast as Labor Unrest Hits Sales

Jun 12, 2014 3:21 am ET

(Updates with share price in fifth paragraph.)

June 12 (Bloomberg) -- Aer Lingus Group Plc, the Irish airline part-owned by Ryanair Holdings Plc, cut its earnings forecast for this year as a strike and threat of further industrial action hit bookings. The shares dropped.

Operating profit before net exceptional items will fall 10 percent to 20 percent, compared with a previous target of matching last year’s figure, the Dublin-based carrier said in a statement today. The airline reported earnings of 61.1 million euros ($82.7 million) in 2013.

The forecast cut is the second in as many days by a European airline, following Deutsche Lufthansa AG’s scaled-back earnings prediction yesterday. A work-assignment dispute with Aer Lingus employees led to a strike on May 30, potentially disrupting Chief Executive Officer Christoph Mueller’s plan to gain a bigger share of the trans-Atlantic market. Unions agreed late yesterday to defer a further two days of walkouts to consider an interim recommendation from the labor court.

“The threat of this strike has caused significant damage to Aer Lingus’s trading and forward bookings for several months into the future,” the carrier said today. Profit for the full year will “depend in part on the speed with which we can win back customer confidence.”

Aer Lingus fell as much as 4.4 percent, the steepest intraday drop since May 30, and was trading down 2.7 percent at 1.45 euros as of 8:12 a.m. in Dublin.

The airline expanded long-haul capacity by 12 percent last year with the average load factor, or seat occupancy, across the business rising 0.7 percentage point to 78 percent. Revenue from long-haul passengers increased 11 percent.

“This morning’s news is clearly disappointing and, while strike action has been called off for next week, the damage caused by the proposed strikes has been done,” said David Holohan, an analyst at Merrion Capital, who recommends buying the stock.

The strike last month and averted walkout next week center on cabin crew flight rosters. Employees are also involved in a dispute over the company’s joint pension plan with the Dublin Airport Authority, which has a deficit.