Air fares will rise due to higher oil prices – Aer Lingus CEO
The chief executive of Aer Lingus has said it is inevitable that fares at the airline will rise as a result of rising oil prices.
Lynne Embleton said fuel costs are a large part of the overall cost base of an airline, typically making up 25-30%.
“When fuel price goes up it is inevitable eventually that will be passed through to customers,” she said.
“It doesn’t happen immediately but you would expect the industry to recover those costs,” she added.
The CEO claimed the airline still has low fares available both to European and US destinations. “But ultimately we do see fuel costs needing to be reflected in price,” she added.
Ms Embleton also said that Aer Lingus’s plans to recover its level of services and passenger numbers had not been hit by disruption caused by staff shortages in airports, including Dublin, and elsewhere.
“We are absolutely still flying the programme that we set out, we are at 85% of 2019 capacity already and as you know that it is intended to get to 90% at the peak and we’re absolutely on track for doing that,” she said.
“You’ve seen globally the impact of supply chain shortages and problems with airport security in many many airports around the world and we are not immune to that,” she added.
“We’ve recruited, we’ve been pleased with the number of people who want to join Aer Lingus, and we are ramping up nicely,” she stated.
The Aer Lingus CEO said that forward bookings had been really strong, particularly for leisure travel, both transatlantic and short haul.
However, she said unlike the rest of the IAG group, Aer Lingus is experiencing a slower pick up in near term bookings, particularly for business.
“Ireland has been slower to come out of Covid restrictions than other markets, still had pubs and restaurants shut a few months ago after about 8pm, and we’re still seeing it being relatively slow in getting back to the office and getting back to normal in Ireland,” she said.
“So I’m seeing business activity a little bit lagging, but that should come back over time,” she said.
Meanwhile, it has emerged Aer Lingus used its Heathrow landing slots as security when securing an additional €200m three year debt facility from the state backed Ireland Strategic Investment Fund (ISIF) earlier this year.
“In the event that Aer Lingus was not able to pay the debt, then the Irish Government and ISIF would then have influence on how those slots are used, but it obviously is our intention to honour this and pay the debt as we’ve drawn it down,” Ms Embleton said.
Under the agreement to sell Aer Lingus to IAG seven years ago, the Government received a commitment that the valuable Heathrow slots which it operated would be used for Irish routes for at least seven years.
That moratorium ends this year.
However, the Government will continue to have a veto over the sale of slots.
The ISIF agreement, struck in March, is the second such funding deal reached between it and Aer Lingus.
In December 2020, ISIF agreed to lend €150m to the airline and it was subsequently drawn down that year and in 2021.
However, Ms Embleton said that agreement was not secured on Heathrow slots.