I like the airlines and the telcos so I was very interested when a friend mentioned Aer Lingus to me yesterday. I waited till the results came out and I can see that operating losses have rocketed (almost quadrupled), revenues and ticket prices down. Even with various cost cutting measures this company is in real trouble and on my quick and dirty report scanning tool comes up as a RED (i.e. heavily avoid this)
However, there are two very important factors not taken into consideration here.
1. A certain Mr O'Leary
The aggressive Ryanair CEO has been itching to get his grubby little mitts on these guys for quite some time now. With their debts out in the open there could be some aggressive bidding taking place which is sure to drive the share price up and if a takeover goes ahead could be very promising indeed as an investment at this point. AERL's ancilliary revenue has rapidly increased demonstrating the success of their move to the budget airline model of charging customers for seat selection, extra bags and online alcohol etc;
2. Total company restructuring is taking place. Aircraft leases and financing being renegotiaited with Airbus. Focus on stripping back on all the non-essentials to increase ancilliary revenue. A new CEO joins the company shortly and several routes have been cut.
Whatever happens a newer stronger company will emerge - the question is whether this is one headed by O'Leary or not?
In any case i am in for the ride to see where this one lands up. Definetely a risky play but i think a potentially profitable one.
Thanks for the tip Em!
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