The airline industry is returning to crisis. In the United States of America the industry is in turmoil. United Airlines, one of the world's largest carriers, is struggling to maintain control of its restructuring while under chapter 11 protection. Despite being one of the most profitable airlines in the USA in recent years, Delta appears to be almost completely focused on seeking chapter 11 protection having sustained net losses of $2.4 billion in the first six months of this year. US Airways, an airline mentioned by some of the Deputies present as it flies into Ireland, has refiled for such protection for the second time in 18 months. According to it, while the restructuring which took place under chapter 11 protection in 2002 and 2003 helped it to reduce operating costs by nearly $2 billion, the dramatic growth of low-cost carriers, unabated fuel price increases and the public's demand for lower, simpler fares require that it does more to achieve an even more competitive cost structure. It is clear that despite restructuring under chapter 11 protection, the airline has been unable to compete with Southwest Airlines.
There is fierce competition in the European market which has seen substantial capacity growth through low-cost carriers. One airline analyst has described the industry as brutally competitive. The short haul model of European flag carriers is broken and the companies concerned are inherently loss-making. A price war is anticipated which my good colleague in Ryanair, Michael O'Leary, expects to be a bloodbath. Ryanair and Aer Lingus are among only a handful of airlines which make a profit on short haul operations in Europe.
Fuel prices are rising which is adding to the strain. Crude oil prices are at an all-time high. Today they touched nearly $52 a barrel. Despite constant supply assurances from OPEC, the market appears to react only to bad news. The fact that little damage has been done to world economies so far suggests real potential for prices to remain high. Refining margins for jet fuel have more than doubled in the past two years. Given these high fuel prices, casualties in the industry are inevitable. I have provided for the committee a graph of jet fuel prices from April 2003 to the end of September 2004 from which members will see that prices have more than doubled since September 2003 to over $500 per tonne.
I remind the committee that in the immediate aftermath of the tragic events of 11 September 2001 it was clear that if Aer Lingus took no action, operating losses were likely to exceed €90 million. Losses in 2002 would have exceeded €150 million. At the time Aer Lingus had no credit facilities available to it and was burning cash at a rate of approximately €2.5 million per day. We also had a shareholder who was unable to provide financial assistance to the airline because of restrictions on State aid. We faced an immediate cash crisis and were likely to deplete all our cash resources by the end of January or early February. Immediate action was therefore necessary while we developed our survival plan. By taking action quickly, we helped to reduce the losses in the year from the forecast €90 million to €52 million and ended the year in a net cash position. It is to the great credit of everybody in Aer Lingus that this was achieved.
The reality at that stage was that we were facing closure. Aer Lingus was associated with failure and identified by all media sources as a likely casualty along with Swissair and Sabena. Our transatlantic market was in chaos and it, at the time, represented approximately 40% of our revenues and traditionally contributed more than 50% of our profitability. Our load factors had fallen to less than 40% after 11 September 2001 and it was clear our cost base and work practices were unsustainable. The action required had to be urgent, radical and, more significantly given this was not the first time we had faced into a major downturn, the change had to be permanent. Since then, it is fair to say we have delivered a more sustainable business which is profitable and has a much stronger financial position. We are more efficient, have lower costs and are using technology in a much better way. We have introduced and delivered on our commitment to low fares and transparent pricing particularly through the Internet. Aer Lingus customers have saved more than €560 million since 2001 as a result of lower prices.
We are moving to a modern short haul fleet and have introduced or announced 39 new routes connecting Ireland with continental Europe and providing much better direct access to Ireland. That has had significant benefits for tourism and business. We now provide a real choice for consumers. Our worldwide sales on the Internet have increased from a low of 2% in November 2001 to more than 62%. Some 75% plus of sales in Ireland are made through the website with more than 200,000 visitors a day generating revenue in excess of €2.5 million. Our website was revamped at the end of September and we have put in place a continuous improvement and strategic plan to achieve 85% of all sales by 2006. The introduction of self-service check-in, FastPass, which is designed to simplify our frontline product and enhance our customer service, has received excellent customer feedback. The next stage of the development will allow our customers to check-in on the Internet and print off their boarding passes before arriving at the airport. Approximately 45% of all our passengers at Dublin Airport are now using self-service check-in.
Despite all of this and the fact that we reduced our cost base at the end of 2003 by more than 30% or, €344 million, it is clear that our cost base is still too high and our efficiencies are too low. Significant further unit cost reduction is required. Our average fare in Europe at €83 in 2003 was significantly higher than that of our competitors. Competition particularly in Europe and from new European low cost operators is intensifying. It is important to point out that there are now more than 90 airlines serving Ireland. Ireland is not served by Aer Lingus and Ryanair alone. Urgent action is needed to address this situation.
By way of background, it is important to point out that the revenue generated by Aer Lingus comes from three sources — the Ireland-UK market represents approximately 31% of our revenue with the European and transatlantic markets representing 32% and 37% respectively. We face much competition in each of these markets. There is intense competition in the UK from Ryanair, British Midlands, bmibaby, My Travel Lite, Cityjet, British Airways and, more recently, the entry into the Irish market of EasyJet. From Europe we have competition on practically every route we serve. I will later list a number of the airlines which compete directly with us in Europe. In the United States we have direct competition from Delta Air Lines, Continental Airlines and US Airways and indirect competition from many other carriers. A number of the carriers listed on the chart are effectively bankrupt with less than five of those listed being profitable, Aer Lingus being one of them.
Some 63% of our total revenue comes from short haul operations. This is the area of most competition within Europe. The new business plan approved by the board on 26 July covers the end of the current year, 2004, through to end 2007. It is a growth plan that will deliver significant increases in passenger numbers. Our commitment to low fares will see our average fares continue to reduce year on year over the period of the plan. As a result, our revenues will decline in 2005 and 2006 before returning in 2007 to the levels achieved in 2003 on the back of fleet expansion. To support and sustain low fares for customers, significant reductions in unit costs are vital.
Aer Lingus has now successfully repositioned itself as a low fares carrier. In August 2003, more than a year ago, the Aer Lingus mission, vision and values were revised to reflect this new direction in the business. These values were communicated internally and externally through the highly successful advertising campaign which features the aerlingus.com “Low fares Way Better” logo. Our mission is to provide safe, efficient and profitable low fare air travel to our customers. Our vision is to be recognised by our customers and the industry as one of Europe’s leading low fares airlines. Our focus to date has centred largely on short haul operations but our vision has now been reinforced to include our transatlantic operations and potential new long haul destinations. Our vision is to be recognised by our customers and the industry as one of Europe’s leading low fares airlines and a pioneering, profitable long haul low fares airline.
Much has been said about the positioning of Aer Lingus. I hope to clarify for the committee exactly where it stands today. The left-hand side of the chart illustrates the old, traditional full frills model. The type of words associated with this type of carrier is impressive, sophisticated, flexible but expensive. In other words, pricey but smart. On the right-hand side it illustrates the no frills low cost model: cranky, basic, unapologetic, tolerable, cheap and nasty. The positioning of Aer Lingus as a friendly, practical, fair and relevant airline to its customers is cheap and cheerful.
Aer Lingus fare structures have been significantly revised as part of its business plan. These changes were implemented on 27 September. All restrictions on its fares to all routes have been removed. One can access the cheapest fares on a one way basis. This is seen as a pioneering move on the transatlantic route. Aer Lingus is the only carrier providing that type of fare structure. US media coverage has been extremely positive and they have been asking when the industry will follow our direction. Our transatlantic premier prices have been reduced by more than 40% and aerlingus.com has been redesigned to reflect this new structure.
Aer Lingus plans to continue its strategy of route expansion to cater for market requirements by increasing the range of destinations it serves. During the lifetime of the plan, we will introduce more direct services from Ireland to a mix of destinations. In 2007, we will add aircraft to the fleet. The plan envisages radical growth in continental European traffic. It, however, assumes no growth in transatlantic passengers due to the outdated constraints of the Ireland-US bilateral agreement. It is significant to point out that Aer Lingus will serve more continental destinations from Cork in 2005 than it served from Dublin in 2001.
Another issue being addressed is the short haul fleet. Aer Lingus has taken delivery of six aircraft with the seventh being due for delivery in October and the programme will be complete this time next year. We are currently evaluating our long haul fleet. We have received proposals from the aircraft manufacturers and discussions are ongoing. We are preparing a planning application for the development of the Aer Lingus head office site.
There can be no return to the old business model in Aer Lingus. That business model was bankrupt and is no longer relevant. Going forward we need less complexity and greater focus on Internet sales, the use of technology with e-ticketing, FastPass self-service, a common A320 fleet providing a significant unit cost advantage, less business class and simple pricing structures, clearly indicating that more change is required. More cost reduction is essential and it needs to be across all our cost areas. Aer Lingus is committed to low fares and to developing more new routes. Profit is essential to ensure the future viability of Aer Lingus.
I would now like to address some rumours circulating in the media. The airline is not changing its name. Aer Lingus is associated with success. There is no question of the shamrock being dropped. Aerlingus.com is our primary sales channel and will continue to be promoted as such, but it is not the brand — the shamrock is the brand. Passenger interline will continue but will be restricted to our One World partners and other key airlines. Our head office will remain in Dublin. While consideration is being given to changing our uniform, no decision has yet been taken.
The business plan we have developed which has been approved by the board will continue and consolidate the process of change started in October 2001. Its implementation will deliver year-round low fares for our customers, significant expansion of our European network, radical growth in passenger numbers, a modern single European fleet offering reduced unit costs, improved productivity, further reductions in our distribution costs, and a 13% operating margin, less than the target we had set for ourselves in June 2002 of 15% at an operating level. It will clearly deliver on our commitment to provide our customers with lower fares.