The Value Carrier Model Of Aer Lingus: One Of National Airlines

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Aer Lingus is the one of the national airlines in Ireland. Its headquarters are at Dublin airport. A fleet of 47 Airbus aircraft are operated by Aer Lingus, and the company carries over 10 million passengers per year on mainline and Regional services.
The company also offers airport services and in-flight services, as well as cargo transportation services, mainly on its long-haul routes. Its cargo services include direct services between cities in Ireland the United States, Europe and the UK, and services such as specialized handling, storage and customs clearing.
In 2013 Aer Lingus started contract flying services to the UK, between Manchester and Edinburgh, and between Aberdeen and London Heathrow, on behalf of Virgin Atlantic Airways Limited.
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A low cost model like the model that Ryanair uses is not sustainable for Aer Lingus so the strategy that they have introduced to their company is the ‘value carrier’ strategy, which is a hybrid of the ‘low cost’ model and the ‘full service’ model. The main elements of the ‘value carrier’ model is reducing long-haul capacity and reducing service in short-haul routes as free meals are only offered on long-haul flights. There is also a renewed focus on maximizing revenue per seat rather than per load.
Operating costs in Aer Lingus has grown more than revenue in 2013. Aer Lingus reports that 2013 was only a satisfactory year for the company as their operating profits were lower than 2012, from €69.1 million in 2012 to €61.1 million in 2013.
Aer Lingus Group Plc report that this drop in profit in 2013 specifically in the second half of the year is only a minor setback and that it is due to “positive developments in the company” according to the chairman, Colm Barrington. These developments include including the start-up costs of the company’s contract flying for third
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The overall gross cash dropped by €11.1 million since 31st of December 2012.
The movements that impacted the gross cash in 2013 was the €21.2 million dividend payment, debt repayments of €47.0 million, investments in the aircraft leasing joint venture of €10.7 million and adverse FX of €12.3 million.
Aer Lingus’ 2013 income statement outlines that as the company’s gross cash decreased by €11.1 million, the gross debt also decreased from €531.6 million to €477.6 million resulting in a net cash increase due to the reduction in finance lease debt.
On 4th May 2012 the company announced a change to its dividend policy. On July 21st 2012 the company paid its first dividend of three cent per share.
On the 6th of February 2013, the board announced that it would recommend a dividend payment of four cent per share. Mr Barrington reported that “due to our continuing positive performance and our confidence in the future of our business”; the company paid its second dividend, of four cent per share, on the 10th of May

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