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Aer Lingus Presentation Template

Version 1

2009 Full Year Results 30th March 2010

2009 Full Year Results | March 2010 Slide 2

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.


Programme

Introduction Christoph Mueller, CEO

2009 Financial Review Andrew Macfarlane, Interim CFO

2009 Commercial Review Stephen Kavanagh, Chief Commercial Officer

2010 Update & Outlook Christoph Mueller, CEO

Q & A


Key Markets Contracted in 2009

Overseas visits to & from Ireland by air declined by (12%) in 2009

2009 Irish GDP decline of (7.1%) & forecast 2010 GDP decline of (2.5%)

Passenger traffic through Dublin airport declined by (13%) in 2009

(12%) (12%)

(14%)(13%)

(9%) (7%)(7%)

(5%)

(16%)

(14%)

(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

0%Q1 09 Q2 09 Q3 09 Q4 09

% C

hang

e vs

. Prio

r Yr

Dublin Airport Passengers Irish GDP Growth %

Relationship between quarterly Irish GDP declines & negative passenger trends continued throughout 2009


Continued Irish Capacity Decline Forecast for Summer 2010

Source: OAG Max Online

Airline seat capacity for Irish airports expected to decline significantly in Summer 2010 due to combination of:

‐ Continuing depressed Irish economic conditions

‐ Government Airport Departure Tax

‐ Higher airport charges passed onto passengers


Despite these negative trends…

Aer Lingus is weathering the storm

Aer Lingus reduced total capacity by just (5.1%) in 2009

Aer Lingus gained market share in 2009, e.g. market share in Dublin Airport up to 36.1% from 34.1% in 2008

Aer Lingus expects to continue gaining market share in 2010

Market share gains will be on a profitable basis only

Market share gains will be achieved along with improvements in yield

performance


Resilient 2009 Performance in Difficult Conditions

Operating profit of €12m delivered in second half

Responsive fleet management action with H2 2009 capacity reduction of (4.4%) vs. H2 2008

Full year operating loss (pre‐exceptional items) of (€81.0m) due to:

– Increased capacity driven by network growth into the economic downturn

– Declining load factors with lower price points did not stimulate demand

– Focus on load factors resulted in depressed yields

Strong balance sheet with gross cash of €828.5m

‐23

‐93

3

12

‐100

‐80

‐60

‐40

‐20

0

20

2008 2009

H1 H2

H1 & H2 Operating Profit

€ m


H1 2009 – Capacity Increases Impacted Results

Severity of economic slowdown in key markets not anticipated

Capacity increases (e.g. Gatwick) did not match underlying demand trends

Focus on load factors impacted yields:

– Total revenue fell by 12%

– Average fare fell by 17%

But positive progress made on costs – total EBITDAR costs (ex fuel) declined by (7.8%).

Operating loss of (€93m) generated for the first six months of 2009

Passengers +1.7%

Total Revenue per RPK (9.8%)

Total Revenue (12.2%)

EBITDAR (174%)

Staff Costs (9.1%)

Unit Costs per ASK ex. Fuel (6.6%)

H1 2009 vs. H1 2008¹

1 Restated following the adoption of IFRIC 13


H2 2009 – Aer Lingus Generated a Small Operating Profit

Topline remains under pressure due to continuing adverse economic condition

However, the rate of yield decline slowed over the course of H2 2009

Staff costs improved due to previous initiatives

EBITDAR improved significantly compared to prior year period due to cost and capacity adjustments taken by management and lower fuel prices

Unit costs per ASK increased due to reduction in ASKs in H2 2009 compared to prior year

Passengers +5.8%

Total Revenue per RPK (7.3%)

Total Revenue (10.0%)

EBITDAR +22.0%

Staff Costs (4.1%)

Unit Costs per ASK ex. Fuel² +4.4%

H2 2009 vs. H2 2008¹

1 Restated following the adoption of IFRIC 13² Includes impact of €18m non‐recurring provision


Aer Lingus is Positioned for Recovery

Small operating profit in H2 2009 due to remedial cost and capacity actions taken by management as well as lower fuel prices

Ancillary revenue performance increased by +16.2% year‐on‐year

Long Haul yield decline slowed in H2 2009

EBITDAR Costs per ASK (ex fuel) in 2009 declined by (4.0%) compared to 2008

Greenfield Cost Reduction Programme agreed and under‐way

Robust balance sheet with valuable portfolio of tangible and intangible assets

Positioned for recovery in key markets


2009 Financial Review

Andrew Macfarlane


2009 | Full Year Financial Results

1 Restated following the adoption of IFRIC 13² Sign convention: favorable / (adverse)

€m unless stated otherwise 2009 2008¹ Change%²

Revenue 1,205.7 1,355.0 (11.0%)

Operating Loss – Pre Exceptionals (81.0) (20.0) (305.0%)

Exceptional Charges (88.6) (140.9) 37.1%

Operating Loss (169.6) (160.9) (5.4%)

Net Interest Receivable 14.8 38.8 (61.9%)

Loss Before Tax (154.8) (122.1) (26.8%)

Tax Credit 24.7 12.2 102.5%

Loss After Tax (130.1) (109.9) (18.4%)

Gross Cash 828.5 1,206.8 (31.3%)

Debt 492.6 552.9 10.9%


2009 | Operating Metrics

1 Based on flown passenger numbers² Restated following the adoption of IFRIC 13

2009 2009 vs. 2008²

H1 vs. PY

€m %

H2 vs. PY

€m %

2009

€m

2008² Change

€m %

ASKs (m) 10,441 (5.9%) 10,787 (4.4%) 21,228 22,370 (5.1%)

RPKs (m) ¹ 7,579 (2.6%) 8,240 (3.0%) 15,819 16,277 (2.8%)

Load Factor % ¹ 72.6% 2.4pts 76.4% 1.1pts 74.5% 72.8% 1.7pts

Passengers (m) ¹ 4.9 1.7% 5.4 5.8% 10.4 10.0 3.8%

Ancillary Revenue per Passenger (€)

16.99 18.4% 16.53 6.3% 16.75 14.97 11.9%

Average Fare per Passenger (€) ² 91.36 (17.1%) 99.48 (16.6%) 95.62 114.91 (16.8%)


2009 | Half ‐ by ‐ Half

Note: 2008 re-stated following the adoption of IFRIC 13¹Sign convention: favorable / (adverse)

2009

€m unless stated otherwiseH1 vs. PY¹

€m €m

H2 vs. PY¹

€m €m

Full Year vs. PY¹

€m €m

Total Revenue 555.0 (76.8) 650.7 (72.5) 1,205.7 (149.3)

EBITDAR Costs (ex Fuel) (391.2) 33.3 (425.4) 0.6 (816.6) 33.9

Fuel Costs (189.6) (17.2) (142.1) 86.8 (331.7) 69.7

EBITDAR (25.7) (60.6) 83.2 15.0 57.5 (45.6)

Depreciation, Amortisation & Aircraft Rent

(67.3) (9.0) (71.2) (6.4) (138.5) (15.4)

Operating (Loss) / Profit pre Exceptional Items

(93.0) (69.6) 12.0 8.6 (81.0) (61.0)


2009 Full Year | Revenue Performance

€m unless stated otherwise2009

€m

2008¹

€m

Change

%

Price

%

Volume

%

Passenger Revenue 992.7 1,149.2 (13.6%) (16.8%) 3.8%

Ancillary Revenue 173.9 149.7 16.2% 11.9% 3.8%

Cargo Revenue 34.3 50.3 (31.7%) (21.7%) (8.6%)

Other Revenue 4.8 5.8 (17.1%) ‐ ‐

Total Revenue 1,205.7 1,355.0 (11.0%) ‐ ‐



2009 | EBITDAR Costs

2009

€m unless stated otherwiseH1 vs. PY¹

€m €m

H2 vs. PY¹

€m €m

Full Yr vs. PY¹

€m €m

Direct Operating Costs 73.0 4.6 74.2 (1.4) 147.2 3.2

Airport Charges 121.4 (7.9) 130.6 (1.2) 252.0 (9.1)

En‐Route Charges 28.2 0.7 30.8 (2.4) 59.0 (1.7)

Maintenance 37.2 (4.9) 33.2 8.8 70.5 4.0

Staff Costs 152.1 15.2 160.1 6.9 312.2 22.1

FX Hedging (Gain)/Loss (20.7) 25.5 (3.5) (10.1) (24.2) 15.5

Total Ex‐Fuel 391.2 33.3 425.4 0.6 816.6 33.9

Fuel 189.6 (17.2) 142.1 86.8 331.7 69.7

Total Incl. Fuel 580.7 16.2 567.5 87.5 1,148.2 103.7

Note: 2008 re‐stated following the adoption of IFRIC 13¹Sign convention: favorable / (adverse)


2009 | Staff Costs

3393,972 3,7484,214 4,071FTEs at Period End

2008 2009 2009 vs. 2008 ¹

€m unless stated otherwiseH1 H2

€m €m

H1 H2

€m €m

Full Yr

€m

Avg. FTEs per Period 4,191 4,169 3,991 3,923 224

Staff Costs 167.3 167.0 152.1 142.1 40.1

Provision ‐ ‐ ‐ 18.0 (18.0)

Total Staff Costs 167.3 167.0 152.1 160.1 22.1

¹Sign convention: favorable / (adverse)

142.1152.1

167.0167.3 3,748

4,2144,071 3,972

130

145

160

175

08 H1 08 H2 09 H1 09 H2

Sta

ff C

osts

€m

3,000

3,500

4,000

4,500

FTEs

at P

erio

d En

d

Staff Costs FTEs at Period End


2009 | Fuel Costs

68.7189.6 142.1171.5 228.9Total Fuel Cost (incl. Into Plane Costs) ‐ €m

2008 2009 2009 vs. 2008

H1 H2 H1 H2 Full Yr ¹

Fuel Consumption (‘000 tonnes) 268.4 270.2 243.7 251.7 43.1

Avg. Price per Tonne (excl. Into Plane costs) – US$ 925 1,168 990 757 173

Avg. Into‐Plane Costs – US$ 52 53 51 57 (2)

Avg. Price per Tonne (incl. Into Plane Costs) – US$ 977 1,221 1,042 814 171

¹Sign convention: favorable / (adverse)²Excluding into plane costs

Avg. Fuel Price per Tonne (excl. Into Plane costs)

• 75% of estimated fuel consumption for April to December 2010 hedged at avg. price of US$772 / tonne


2009 | Exceptional Costs

€m unless stated otherwise 2009 2008

Provision for Greenfield Redundancy Payments 51.9 ‐

Deferred Greenfield Payment to Staff 25.0 ‐

2008 Programme ‐ 117.5

Total Restructuring Payments 76.9 117.5

Under‐Provision for 2008 Programme 11.7

2008 Compensation under Previous Cost Initiatives ‐ 17.5

Takeover Defence Costs ‐ 5.9

TOTAL EXCEPTIONAL COSTS 88.6 140.9

Greenfield payback period less than one year


2009 | Net Interest Income


Interest Income 34.8 59.2

Average Rate of Interest Income (%) 3.4% 4.8%

Interest Expense (22.1) (21.5)

Average Rate of Interest Expense (%) 3.7% 4.3%

Other Net Interest & Financial Items 2.1 1.1

TOTAL NET INTEREST INCOME 14.8 38.8


2009 | Taxation


Irish Corporation Tax ‐ ‐

Deferred Tax Credit for Year 12.0 12.2

Adjustment of Prior Year Provisions 12.8 ‐

Total Income Tax Credit 24.8 12.2

Effective Tax / (Credit) Rate % on Loss Before Tax (16.0%) (10.0%)

Deferred Tax Asset Comprises:

Losses 36.1 23.6

Capital Allowances (45.5) (39.4)

Other (Principally Provisions) 14.2 19.2

TOTAL 4.8 3.4

Aer Lingus has significant tax losses carried forward of €494m


2009 | Cashflow


Operating Profit Before Exceptional Items (81.0) (20.0)

Add back Depreciation & Amortisation 82.7 71.9

Movements in Non‐Exceptional Provisions 1.2 (0.8)

Movements in Working Capital (46.2) (41.9)

Other (0.6) (2.9)

Adjusted EBITDA (43.9) 6.3

Aircraft, Flight Equipment & Other Tangible Capex (168.3) (120.1)

Restructuring Outflows (124.2) (9.9)

Interest 10.2 12.0

FREE CASHFLOW (326.2) (111.7)


2009 | Cash & Debt

€m unless stated otherwise Cash Debt

Balance as at 1st January 2009 1,206.8 552.9

Free Cashflow (326.2) ‐

Net Debt Drawn / (Repaid) (57.9) (57.9)

FX Impact (14.2) (14.5)

Interest Accrued 20.0 12.1

BALANCE AS AT 31st DECEMBER 2009 828.5 492.6

Restricted Cash 58.9


Considerations for 2010

Aircraft

New A330 scheduled for delivery in April. Purchase will be structured through finance lease

No current plans to acquire any other additional aircraft or enter into additonal aircraft operating leases in 2010

2 aircraft currently surplus to requirements. These aircraft have NBVs of approximately €15m each

One A330 on operating lease has been returned to the lessor

Greenfield Programme

In‐year staff saving of €40m expected with exit run rate of €50m.

Non‐staff savings of €4m with exit run rate of €8m

Foreign Exchange & Fuel Hedging

72% of estimated US$ trading requirement for 2010 is hedged at € / US$ 1.48

50% of estimated Stg£ requirement for 2010 is hedged at € / Stg£ 0.88

75% of estimated fuel consumption for April to December 2010 hedged at avg. price of US$772 per tonne excl. into plane costs.

28% of estimated fuel consumption for 2011 is hedged at average price of US$774 per tonne excl. into plane costs.


Commercial Review

Stephen Kavanagh


2009 Full Year | Business Overview

Short haul performance for 2009 is broadly break‐even despite significant losses generated by the Gatwick base (based on full allocation of fixed overheads)

Gatwick losses were deemed unacceptable by management and resulted in the capacity reduction programme announced in January 2010

Short haul trading in Dublin and Cork was broadly satisfactory

While Belfast was loss‐making in 2009, it is a new base and is trading on an improving trajectory

Gatwick capacity changes and Greenfield cost saving will make a material improvement in 2010 trading but we are likely to still incur long haul losses in 2010


2009 | Full Year Short Haul Performance


2009 2008¹ Change %

Average Aircraft 36 33 9.1%

ASKs (m) 13,220 12,328 7.2%

Passengers (m) 9.3 8.7 6.5%

Passenger Revenue (€m) 717.4 765.1 (6.2%)

RPKs (m) 9,965 9,109 9.4%

Passenger Load Factor (%) 75.4% 73.9% 1.5pts

Average Fare (€) ¹ 77.10 87.57 (12.0%)

Revenue per RPK (€ cent) 7.20 8.40 (14.3%)


2009 Full Year | Short Haul Performance

Passenger volumes improved vs. prior year but yields were impacted by average fare decline.

Short Haul performance improves significantly when adverse impact of Gatwick is excluded.

Short Haul Key Metrics – including LGW Base

Seats +3.8%

Passengers +6.5%

Average Fare (12.0%)

Revenue (6.2%)

ASKs +7.2%

RPKs +9.4%

Revenue per RPK (14.3%)

Impact on 2009 Short Haul metrics when LGW Base is excluded

(8.7%)Seats

Passengers (7.6%)

Avg. Fare per Passenger 2.1%

Revenues (5.7%)

ASKs (10.6%)

RPKs (9.1%)

Revenue per RPK 3.8%


2009 | Full Year Long Haul Performance


2009 2008 Change %

Average Aircraft 8 9 (11.1%)

ASKs (m) 8,008 10,042 (20.3%)

Passengers (m) 1.1 1.3 (14.8%)

Passenger Revenue (€m) 275.3 384.1 (28.3%)

RPKs (m) 5,854 7,168 (18.3%)

Passenger Load Factor (%) 73.1% 71.4% 1.7pts

Average Fare (€) ¹ 255.70 303.87 (15.9%)

Revenue per RPK (€ cent) 4.70 5.36 (12.2%)


2009 Full Year | Long Haul Performance

2009 long haul performance impacted by reduction in capacity and decline in average fare

Long Haul ASKs forecast to decline from 8.0m to 6.4m in 2010

Year end yields remained below prior year levels but the rate of yield decline has lessened

Long Haul ASKs (bn)

7.47

7.61

8.89

10.04

8.01

6.36

2005 2006 2007 2008 2009 2010

‘05 to ‘08CAGR: +10.3% ‘05 to ‘10

CAGR: (3.3%)

Long Haul Capacity Reduction

5

4

5

4

5

3

0

1

2

3

4

5

6

7

8

9

2007 2008 2009

A330-300 A330-200


2009 Full Year | Ancillary Revenue Growth

Ancillary Revenue per Passenger (€)2009 ancillary revenue increased by 16.2% in 2009 to €173.9m

Ancillary revenue per passenger at €16.75 –an increase of 11.9%

Strong yr‐on‐yr performances from:

‐ Online booking fees

‐ Car hire commission

‐ Baggage fees

‐ Card fees

‐ Seat selection revenues


Capacity Reductions to Match Demand

Tactical capacity reductions allowed Aer Lingus to improve the economics of its long haul network –albeit at the expense of a reduction in aircraft utilisation rates

Utilisation rates were also negatively impacted by retired aircraft which remained registered while awaiting re‐delivery

It made more economic sense to reduce long haul capacity rather than to continue to operate elements of the long haul fleet where the revenues generated were insufficient to cover variable costs incurred

Utilisation (block hours per day) 2009 2008 Change %

Short Haul 10.2 10.4 (1.9%)

Long Haul 11.6 14.3 (18.9%)


2009 | EBITDAR Unit Costs – per ASK

€m unless stated otherwise 2009 2008 Change %

Staff¹ 1.39 1.49 (6.7%)

Airport Charges 1.19 1.09 +9.2%

Ground Operations 0.48 0.45 +6.7%

Maintenance Expenses 0.33 0.33 -

En-Route Charges 0.28 0.26 +7.7%

Distribution Costs 0.21 0.22 (4.6%)

Other (0.11) (0.04) +175.0%

Total Unit Cost (ex-Fuel) 3.76 3.80 (1.1%)

Fuel 1.56 1.79 (12.9%)

TOTAL CASH UNIT COST 5.32 5.59 (4.8%)

Continued reduction in unit cost per ASK

1 Excludes impact of €18m non‐recurring provision


Competitive Cost Base Relative to Selected Peers

Aer Lingus’ cost base already compares favorably with selected peers on a pre‐Greenfield savings basis

Post Greenfield, our cost competitiveness will improve even further relative to our peers

EBITDAR Cost / ASK – excl. Fuel (last available 12 months) ¹

1 Excludes impact of €18m non‐recurring provision in EI staff costsNote: Post Greenfield estimate is based on pro‐forma 2009 costs & ASKs

9.54

8.62

6.05 5.97

5.24

3.95 3.89 3.76

3.08

1.72

3.30

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

SK LH AF IB AY AB BA EI EZ FR EI

€ cent

Pre-

Greenfield

Post-

Greenfield


Aer Lingus | Progress on Recovery Objectives

Company has commenced “Greenfield” implementation

Tight management of capacity deployment to better match demand

Aircraft delivery deferrals to preserve cashflow commitments

Belfast base performance on track

Extended code share agreement with United Airlines

Aer Arann franchise agreement now in operation

IT restructuring on track & Programme Office fully established


2010 Update & Outlook

Christoph Mueller


“Greenfield” Cost Reduction Programme

All five staff unions have now voted to support Greenfield proposals

This is a clear mandate from 74% of Aer Lingus staff who voted to implement the Cost Reduction Programme

Despite slight delay in commencing elements of Greenfield, total staff savings of €40m (exit run rate of €50m) still expected to be achieved in 2010

Projected EBITDAR unit cost per ASK (excl. fuel) post Greenfield is 3.30 euro cent, i.e. 12% improvement over current cost base

Greenfield benefits tracking systems now established & updates to be provided to the market as progress is achieved

Implementation of Greenfield remains essential


2010 outcome highly dependent on underlying GDP performance in key markets

2010 winter schedule not yet finalised but final schedule will be demand driven

2010 | Performance Drivers

2010 Uncertainty

Key Trading Levers

Focus will remain on managing Yield per ASK to positively impact the bottom line

Management satisfied with development of yield metrics for first 3 months of 2010

Improvement of Passenger Load Factors will remain a second priority

Management reserves the flexibility to actively manage capacity, e.g. grounding of aircraft if surplus to demand


2010 Trading Update & Outlook

Revenues per ASK and per RPK are slightly higher than prior year

Long Haul revenue per passenger for the first 3 months is above last year

Short Haul revenues are broadly in line with prior year driven by yield performance

The forward revenue profile is positive but there is limited visibility over H2 2010

Despite the slight delay in commencing Greenfield, we are confident in achieving targeted savings

Positive Q1 but full year 2010 outlook remains uncertain


Q & A


Supplementary Slides


Supplementary Slide | Historic FX

2009 2008

H1 H2 Full Yr H1 H2 Full Yr

US$

Hedged Amount – US$m 205.0 235.0 440.0 219.5 320.0 539.5

Hedged Rate 1.49 1.47 1.48 1.47 1.48 1.48

Average Spot Rate for Period 1.34 1.45 1.39 1.53 1.44 1.48

Stg£

Hedged Amount – Stg£m 44.0 32.8 76.8 31.0 21.8 52.8

Hedged Rate 0.81 0.83 0.82 0.72 0.74 0.73

Average Rate for Period 0.91 0.89 0.90 0.77 0.80 0.78


Total Revenue (€m) Passenger Volumes (‘000s)

EBITDAR (€m) Unit Cost per ASK – ex. Fuel (€cent)

Supplementary Slide | Historic Development

574.1631.8

555.0

710.8 723.2650.7

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

H1 07 H1 08 H1 09 H2 07 H2 08 H2 09

4,3984,858 4,943 4,907

5,1435,439

-

1,000

2,000

3,000

4,000

5,000

6,000

H1 07 H1 08 H1 09 H2 07 H2 08 H2 09

56.5

34.9

(25.7)

151.8

68.283.2

-40

-20

0

20

40

60

80

100

120

140

160

180

H1 07 H1 08 H1 09 H2 07 H2 08 H2 09

4.49

3.823.75

4.19

3.77 3.78

3.2

3.4

3.6

3.8

4

4.2

4.4

4.6

H1 07 H1 08 H1 09 H2 07 H2 08 H2 09


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