After being just weeks from running out of cash in late 2001, Irish flag carrier Aer Lingus is back in profit and reinventing itself as a lower-fare operator.

Aer Lingus is forecasting an operating profit in excess of €45 million ($48 million) for 2002, after making an operating loss of €52 million the previous year. Although it expects revenues to be flat over the next couple of years, Aer Lingus aims to achieve operating margins of 15% driven by a €320 million cost-cutting programme. The carrier believes the collapse in business yields heralds a long-term structural change within the industry and is not counting on a recovery.

Cost-cutting moves include transforming its European network, barring a few key routes, into a one-class product and charging for on-board catering.

Furthermore, it will transfer to a one-type short-haul fleet. At present it operates 10 Airbus A321/320s and 11 Boeing 737s, but is planning an order of around 15 aircraft to replace one of the two families in order to reduce costs and improve operational flexibility. Its fleet of six leased BAe 146 jets will be phased out by the end of the year, while its long-haul fleet will continue to be based around the A330-200/300 type.

With low-cost Ryanair its main competitor on many routes, the Aer Lingus strategy is based on reducing fares and generating higher traffic volumes, with discounted fares up to 60% below 2001 levels. A major area of improvement is Internet ticket sales, which had soared from just 2% of total sales at the end of 2001 to 40% by the end of last year.

Source: Airline Business