Annual report and accounts 2016
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23<br />
Aer Lingus<br />
Making the most<br />
of our opportunities<br />
“<strong>2016</strong> has been a year of<br />
profitable growth with a<br />
strong return on invested<br />
capital supported by<br />
reduced non-fuel unit<br />
cost <strong>and</strong> an improved<br />
guest value proposition.”<br />
Stephen Kavanagh<br />
Chief Executive Officer of Aer Lingus<br />
Performance 1<br />
€ million <strong>2016</strong><br />
Higher/<br />
lower<br />
Revenue 1,766 +2.8%<br />
EBITDAR 399 +40.2%<br />
Operating profit 233 +86.9%<br />
Key statistics<br />
Punctuality<br />
82.5<br />
Fuel efficiency gCO 2<br />
/pkm<br />
87.0<br />
1 The comparison to 2015 includes the annualised results of Aer Lingus<br />
Overview<br />
Throughout <strong>2016</strong>, we have leveraged<br />
the benefits of IAG ownership, with<br />
accelerated network <strong>and</strong> fleet growth,<br />
cost synergies <strong>and</strong> increased market reach<br />
to deliver a record operating margin of<br />
13.2 per cent This result is underpinned<br />
by our positioning as a value carrier <strong>and</strong><br />
our application of a resilient dem<strong>and</strong> led<br />
business model – a model that is simple<br />
by design; centred on cost, product <strong>and</strong><br />
service. We are committed to delivering<br />
value to our guests, <strong>and</strong> our productivity<br />
<strong>and</strong> non-fuel unit cost improvements in<br />
<strong>2016</strong> have enabled us to deliver more<br />
competitive products, <strong>and</strong> to significantly<br />
improve our operating margin.<br />
An ambitious strategy<br />
Our ambition is to be the leading value<br />
carrier across the North Atlantic, enabled<br />
by a profitable <strong>and</strong> sustainable shorthaul<br />
network. Our strategy is based on key<br />
fundamentals which include a strong<br />
guest-focussed br<strong>and</strong> <strong>and</strong> service, a<br />
network that offers compelling connection<br />
propositions, <strong>and</strong> a competitive <strong>and</strong><br />
resilient cost base. We believe that Aer<br />
Lingus is well positioned to continue to<br />
grow successfully to extract the benefits<br />
of IAG ownership, <strong>and</strong> to deliver on<br />
our targets.<br />
A value carrier focussed<br />
on guest experience<br />
Guided by our “Voice of Guest” surveys<br />
<strong>and</strong> direct feedback, we have continued<br />
to invest proactively in product, process<br />
<strong>and</strong> br<strong>and</strong> to improve our guest experience,<br />
cost <strong>and</strong> value proposition. A key focus in<br />
<strong>2016</strong> was our on-time performance <strong>and</strong> we<br />
achieved the most punctual status every<br />
month at our main base of operations, <strong>and</strong><br />
were placed in the top 20 most punctual<br />
airlines globally.<br />
Aer Lingus targets aligned with IAG targets 1<br />
<strong>2016</strong> <strong>2016</strong>-2020<br />
Lease adjusted<br />
operating margin (%) 14.9% +6.0pts 15%+<br />
RoIC 23.1% +11.1pts 15%+<br />
ASK growth<br />
per annum 9.6% 8%<br />
Fleet 47 59<br />
The roll-out of our new transatlantic<br />
business cabin was completed with<br />
consistency across the Aer Lingus Airbus<br />
A330 <strong>and</strong> Boeing 757 fleets. In <strong>2016</strong>, we<br />
introduced new <strong>and</strong> enhanced retail<br />
products, simplified boarding processes<br />
<strong>and</strong> automated check-in facilities, <strong>and</strong><br />
launched our new loyalty programme<br />
AerClub, with Avios, in the fourth quarter.<br />
These initiatives <strong>and</strong> the dedication to<br />
service delivered every day by the team<br />
at Aer Lingus have been rewarded by<br />
increased seat factor, guest satisfaction<br />
<strong>and</strong> cost efficiencies. Our “Good to<br />
Great” programme, which incorporates<br />
consistent service st<strong>and</strong>ards across the<br />
customer journey, continues to deliver, <strong>and</strong><br />
we received external validation with the<br />
award of a 4-star rating by Skytrax during<br />
the year, becoming Irel<strong>and</strong>’s first <strong>and</strong> only<br />
4-star airline.<br />
Building the Dublin Gateway<br />
We remain committed to exploiting<br />
the geographic advantage of Dublin<br />
as a gateway between Europe <strong>and</strong><br />
North America. In <strong>2016</strong>, we continued<br />
our profitable growth, we built on the<br />
momentum of recent years, with direct<br />
services to Los Angeles, Newark <strong>and</strong><br />
Hartford, strengthening IAG’s leadership<br />
across the transatlantic <strong>and</strong> leveraging<br />
the power of the Aer Lingus mainline <strong>and</strong><br />
regional shorthaul networks.<br />
The profitable network growth was enabled<br />
by the introduction of an additional Boeing<br />
757 <strong>and</strong> two Airbus A330-300s, the latter<br />
procured jointly with the benefit of IAG.<br />
In 2017, we will introduce two more Airbus<br />
A330-300s to add frequency <strong>and</strong> capacity<br />
across our networks, <strong>and</strong> we will begin a<br />
new direct service to Miami. We continue<br />
to use this growth to drive efficiency <strong>and</strong><br />
productivity in our Dublin operations.<br />
Revisions to turn, team composition <strong>and</strong><br />
increased use of automation, for example,<br />
in combination with the increased scale of<br />
operations, have improved the relative cost<br />
competitiveness of the Gateway.<br />
Conclusion<br />
In 2017, we, in Aer Lingus, will build upon<br />
our success <strong>and</strong> target sustainable<br />
returns for IAG. Our commitment to our<br />
dem<strong>and</strong> led value carrier model will see<br />
us continue to focus on cost, product <strong>and</strong><br />
service. In addition, we will develop our<br />
commercial capabilities to further leverage<br />
the network opportunities provided by<br />
fellow IAG airlines, American Airlines <strong>and</strong><br />
other partners.<br />
Strategic <strong>report</strong> Corporate governance Financial statements Additional information<br />
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