christoph mueller, aer lingus...

Christoph Mueller, Aer Lingus CEO 26 August 2010

Disclaimer | Forward Looking Information

Certain information included in these statements is forward-looking and involves risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward looking statements.

Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions and the Company's plans and objectives for future operations, including, without limitation, discussions of the Company's Business Plan programs, expected future revenues, financing plans and expected expenditures and divestments. All forward-looking statements in this report are based upon information known to the Company on the date of this report. Due to such uncertainties and risks, you should not place undue reliance on such forward-looking statements, which speak only as at the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law or by any appropriate regulatory authority.

It is not reasonably possible to itemise all of the many factors and specific events that could cause the Company's forward looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Among the factors that are subject to change and could significantly impact the Company’s expected results are the fuel costs, competition from new and existing carriers, costs associated with environmental, safety and security measures, actions of governments and regulatory authorities, fluctuations in currency exchange rates and interest rates, airport access and charges, industrial relations, the economic environment of the airline industry and the general economic environment in the markets to which the Company operates.

Welcome & introduction

4

Who we are

Aer Lingus | 26 August 2010

Aer Lingus overview

• Headquartered in Dublin, Ireland• We will celebrate our 75th birthday in 2011• We operate 44 aircraft on routes to destinations in the UK, Europe

and North America• We carried 10.4 million passengers in 2009• We connect Ireland with the world by offering the best product in

the Irish airline market at a competitive price to passengers• We serve both leisure and business travellers with a quality core

product that can be augmented through a la carte paid options• Unlike some low cost operators, we serve central airport locations

enhancing connectivity options for our passengers• We offer this airport selection at more competitive fares than most

legacy carriers

5

Phases in the Aer Lingus story


The recent past

Immediate actions to

address issues

Delivering results in H1

2010Re-positioning Profitable

growth

The recent past

Yr-on-yr movements in GDP & passenger traffic remain linked – except for Ireland

7

Dublin Airport ¹ London Heathrow & Stansted ¹

Frankfurt Airport ¹ Charles de Gaulle & Orly ¹

Schipol Airport ¹ Comment

• GDP trends continue to correlate closelywith passenger traffic in most Europeanterritories except Ireland

• Outlook remains uncertain & IATA notethat the “post recession re-bound may beslowing”

¹ Growth compared to same quarter of previous year

(15.0%)

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

Q1 Q2 Q3 Q4 Q1

2009 2010

Dutch GDP Schipol

(10.0%)

(5.0%)

0.0%

5.0%

Q1 Q2 Q3 Q4 Q1

2009 2010

French GDP CDG & Orly

(15.0%)

(10.0%)

(5.0%)

0.0%

5.0%

Q1 Q2 Q3 Q4 Q1

2009 2010

German GDP Frankfurt

(15.0%)

(10.0%)

(5.0%)

0.0%Q1 Q2 Q3 Q4 Q1

2009 2010

Irish GDP Dublin

(10.0%)(8.0%)(6.0%)(4.0%)(2.0%)

0.0%2.0%

Q1 Q2 Q3 Q4 Q1

2009 2010

UK GDP London Heathrow & Stantsed


Core Irish market conditions remain difficult

8

Comment

• Demand conditions remain weakin Aer Lingus’ core Irish market.

• However, the underlying trend ofair travel to & from Ireland is wellestablished and ranks significantlyahead of European peers:

Change in Passenger Numbers May 2010Across all airports in the country (ranked by market size)

Source: Anna Aero

Country Pop. Air Pax Multiple

Ireland 4.5m 26.3m 5.8x

UK 61.6m 198.5 3.2x

Germany 82.0m 158.2m 1.9x

France 64.7m 117,.6m 1.8x

EU 27 500.0m 751.4m 1.5x


Immediate actions - to address demanding trading conditions

Capacity

Yield

Bases

Long haul capacity reduced by 22% in the second half of 2009

Focus is higher yields per passenger rather than simply increasing passenger loads on aircraft

Gatwick losses deemed unacceptable & capacity scale-back announced in January 2010

Slide 9

Difficult to stop losses when Irish GDP declines by (7%) but we took corrective action


AirlineCost Reduction2009/10

% of Revenue (FY YE)

% of Op Cost (FY YE)

British Airw ays £220m 2.40% 2.60%

Air France €700m 2.90% 3.10%

Aer Lingus €97m 7.15% 7.44%

€20m

€16m

€30m

€3m

€10m

€2m

€9m€4m€3m

Cabin Crew Support PilotsAdvertising Airport Charges MtnceOther Staff Other Non-Staff Distribution

• Greenfield is significant and it is organisation wide

• €97m of cost savings

– €74m from staff cost and €23m of other savings

• Cost base reduction target

Workforce - 20%

Back office functions - 40%

Management positions - 40%

• Reduction of 170 of 600 Head Office building / support staff in 2011 / 2012

• Non-Greenfield actions will be supported by IT investment and process re-engineering from 2011

• 10% salary reduction

• Pay freeze until 2012 / 2013

– Pay freeze will potentially avoid additional costs

Immediate actions – “Greenfield” cost reduction programme launched

Greenfield - €97m cost savings

Source: Company information

Larger relative cost reduction programme than competitors

Staff = €74mOther = €23m

Sector cost reductions

Source: Company announcements (FY YE =last reported). Note (2): Excludes restructuring costs

(2)

Delivering results in H1 2010

H1 2010 – Delivering positive performance in difficult conditions

H1 2010 highlights • Improved performance despite air space

closures & still declining demand inprimary Irish market

• Significant swing in Q2 2010 profitabilitycompared to prior year

• Both long haul & short haul operationswere positive at EBITDAR level in H12010

• Upward trajectory in unit revenue trend

• Affirmation of revised approach toinventory & network management

• Financial position remains very robust

• Extremely robust cash position of over€1bn at end of June 2010

• However, cost reduction programmeremains critical

Operating profit

€m

(75)

(18)

(93)

(38)

19

(19)

(100)

(80)

(60)

(40)

(20)

0

20

40Q1 Q2 H1

2009 2010


H1 2010 | Business overview

13

Commercial highlights

• Following a challenging 2009, the first 6 months of 2010 witnessed the turnaround of long haul operations with increased seat occupancy and higher yields.

• Short haul performance was supported by a shift in customer booking patterns to dates closer to the flight departure.

• Commercial impact of air space closures in Q2 2010 has been successfully mitigated and the forward booking profile has recovered.

• Both long haul and short haul operations are now benefiting from remedial actions taken in late 2009 and early 2010.


14

Long haul turnaround supported by network management

Long haul performance overview

• Demand opportunity developed via network management and partnership.

• Connecting traffic flows complementing point to point demand.

• Revenue management and pricing strategy adjusted to reflect this newdemand environment.

• Consistent on-board product introduced across A330 fleet.

• Strong unit revenue improvement delivered by combination of yield and loadfactor improvements.

• Cargo volumes continue to improve year-on-year


Long haul turnaround supported by network management

15H1 2010 Results | August 2010

Long haul yield per passenger growth vs. 2009

Long haul yield per ASK growth vs. 2009 Long haul ASK capacity vs. 2009

Long haul load factor vs. 2009

12.4%

20.9%

17.5%

Q1 10 Q2 10 H1 10

23.5%

36.5%31.1%

Q1 10 Q2 10 H1 10

+ 3.8 pts

+ 6.4 pts

+ 5.2 pts

Q1 10 Q2 10 H1 10

(31.8%) (31.3%) (31.6%)

Q1 10 Q2 10 H1 10

Strong short haul yield growth in H1 2010

16

Performance overview

• Management of revenue per seat metric and not yield or load factor.

• Demand led capacity planning and deployment.

• Flight schedules adjusted to reflect time or price sensitive marketrequirements.

• Underlying or natural demand managed with reduced reliance on promotionalactivity.


Strong short haul yield growth in H1 2010


Short haul yield per passenger growth vs. 2009

Short haul yield per ASK growth vs. 2009 Short haul ASK capacity vs. 2009

Short haul load factor vs. 2009

3.0%

13.8%

9.0%

Q1 10 Q2 10 H1 10

(2.2%)

10.2%

4.3%

Q1 10 Q2 10 H1 10

4.9%

(12.8%)

(5.3%)

Q1 10 Q2 10 H1 10

(1.8) pts(1.5) pts

(1.9) pts

Q1 10 Q2 10 H1 10

H1 2010 | Ancillary revenue growth

18

Ancillary revenue per passenger - €Overview

• Continued growth in ancillary revenueper passenger with a 7.8% increase inH1 2010 compared to correspondingperiod in 2009.

• Volume decline resulting from plannedcapacity reduction contributed to 3.9%decline in total ancillary revenue.

• Strong year-on-year performances from:

• Online booking fees• Baggage fees• Card fees• Seat selection revenues

• New fare family and bundled productsbeing trialled at present.

11.50 11.70

14.35 14.97

16.99 16.7518.32

H1 07 FY 07 H1 08 FY 08 H1 09 FY 09 H1 10


H1 2010 | EBITDAR costs

€m unless stated otherwise H1 2010€m

H1 2009 €m

Change%

Direct operating Costs 46.0 46.9 (1.9%)

Distribution costs 24.9 26.1 (4.6%)

Airport charges 117.6 121.4 (3.1%)

En-route charges 26.9 28.2 (4.6%)

Maintenance 23.7 37.2 (36.3%)

FX hedging (gain) / loss (15.3) (20.7) (26.1%)

Total ex-staff & fuel costs 223.9 239.0 (6.3%)

Staff costs 135.7 152.1 (10.8%)

Total ex-fuel 359.5 391.1 (8.1%)

Fuel 132.1 189.6 (30.3%)

Total incl. fuel 491.6 580.7 (15.3%)

H1 2010 Results | August 2010 19

H1 2010 | Cash & debt

€m Cash Debt

Balance as at 31st December 2009 828.5 492.6

Free cashflow 56.3 -

Net debt drawn / (repaid) 40.8 40.8

FX impact 75.6 70.6

Interest accrued 8.5 4.1

Balance as at 30th June 2010 1,009.7 608.2

Restricted cash 59.5

H1 2010 Results | August 2010 20

Ash cloud disruption - cost of air space closures has been contained

21

• 2,128No. of Aer Lingus flights disrupted

• 2 significant periods ofdisruption in April & MayDisruption periods

• Approx. €10.0 millionEstimated lost gross margin

• Approx. €10.0 million Estimated passenger compensation costs

• Aer Lingus reacted effectively tounprecedented closure of NorthernEuropean airspace in April & May

• Management confident that the totalimpact on Aer Lingus’ operating resultwill be a maximum of €20m

• Total cost as percentage of revenuesis in line with peers

Ash cloud response

Aer Lingus¹

€20m impact

1.7% of revenues

AF-KLM¹

€158m impact

0.8% of revenues

Air Berlin¹

€40m impact

1.2% of revenues

Ryanair¹

€50m impact

1.7% of revenues

¹ Derived from company announcements & most recent annual financial statements

BA¹

Stg£142m impact

1.4% of revenues

easyjet¹

Stg£65m impact

2.4% of revenues


Re-positioning for long term growth

Next steps to implementing our new strategy

State of the Art terminal will welcome visitors to Ireland

Development of Dublin Airport as a strategic transfer point

Working with the Dublin Airport Authority

Satisfying customer needs

Bespoke a la carte enhancements

Fare families

Introduction of EPOS handsets tofurther drive ancillary revenues


Re-positioning Aer Lingus for long term growth

Network

Distribution

Product

Focus on our core mission:

“Connecting Ireland with the World”

Multi-platform strategy adopted to individual markets

Quality core product with paid value enhancing options


Next steps to implementing our new strategy

“Filling-in” our existing short haulnetwork

Aer Lingus code now extendedacross North America

Connectivity

Slide 25Aer Lingus | 26 August 2010

Aer Lingus’ role in industry consolidation

• Network connectivity is key for us as we seek to connect Ireland to the World• Aer Lingus benefits from excellent relationships with members of the

Oneworld, Star & SkyTeam alliances as well as our own partnership initiatives

We will evaluate which of the 3 alliances is best suited to deliver a better product for our customers and a return on investment for shareholders

OneWorld Star SkyTeam Bilateral

• These relationships provide us with a quality partner network with real depth• Asian connectivity remains the main gap in our current network• We are likely to join one of the 3 alliances in the medium term but no

decision has yet been taken


http://www.jetblue.com/�

Partnerships Update

27

• Washington – Madrid commenced on 28March 2010

• Positive trading result at operating profitlevel

• Performance meeting United Airlines’and Aer Lingus’ expectations

• Partners are reviewing opportunities foran additional aircraft in 2011

United Airlines extended code share

• Launched by Aer Arann in March with 4 ofits aircraft serving 12 routes

• 100K+ passengers carried to date

• Meeting Aer Lingus network and franchiserevenue expectations

• 5th ATR72 added to franchise by AerArann in August to commence Shannonservices.

Aer Lingus Regional franchise

Both initiatives have already positively impacted the operating result despite only commencing in late March 2010


“Greenfield” cost reduction programme remains imperative


• Continuing challenge is to actively control upward cost pressures• Fuel costs are volatile over timeCost challenge

• A busy Summer season does not represent easing of operatingenvironment & return to pre-recession demand levels

• 2010/11 winter season will be more a difficult period to sustainrecent yield performance

Operating environment

remains difficult

• Cannot assume recent growth in yields will continue indefinitely• Industry is already adding capacity with effect on long term yields• Yields maximisation cannot compensate for cost inflation

We cannot be complacent on

costs

Decisive action taken on key issues


Dublin Airport Terminal 2

• Agreement with DAA to commence transfer of operations from November 2010• Aer Lingus passengers to benefit from US Custom & Border Protection facilities

Management changes

• Positive steps taken to reduce property portfolio• Includes surrender of leasehold interest in the Head Office Building site to DAA• Financial & operational benefits will accrue to Aer Lingus

Dublin Maintenance

Property consolidation

Transatlantic services

• Chief Operating Officer – Trevor Jensen – appointed on 29 April 2010 • De-layering of organisational structure under way• 40% of remaining management positions with new appointments

• Base maintenance contract awarded to Dublin Aerospace• Services previously undertaken by Sabena Technics in France • Aer Lingus proud to support development of Irish air maintenance activities

• Turnaround of long haul operations a crucial step for the company• Action taken to address loss making Shannon winter services• Aer Lingus remains committed to Shannon transatlantic services for rest of year

Aer Lingus | Progress on key objectives

• Significant turnaround in profitability of long haul operations

• Revised revenue management strategy is generating positive results

• Financial and operational impact of ash cloud disruption contained

• United Airlines extended code share is delivering proof of concept

• Cargo performance continues on positive trajectory

• IT implementation remains on track

30Aer Lingus | 26 August 2010

2010 Trading outlook


Outlook comments

• Cash drain addressed through remedial actions

• Strategic actions are on track

• Strong commercial performance at end of H1 2010

• Full year operating result (before exceptional items) should be no worse than breakeven

• However, this view is heavily dependent on delivery of committed staff productivity savings and nosignificant disruptions to operations from industrial action or further airspace closures

• It is premature to provide firm guidance on likely performance in 2011. However….

• Expected improvement in 2011 costs as a result of continued implementation of Greenfieldprogramme

Thank you !

christoph mueller, aer lingus...

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