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Aer Lingus today reported pre-tax losses of €20.8 m for the first six months of the year, compared with losses of €81.7m the same time last year - - a 74% improvement. The airline made a profit of €18.8m in the second quarter of the year, due to lower operating costs, oil prices and the implementation of its restructuring programme. It said despite challenges, it remains confident of at least breaking even in 2010. Aer Lingus has not returned a profit since 2007.

Passenger revenue fell by 4.6% versus Q2 2009 due to a 16.6% fall in passenger numbers which was partly offset by a 14.3% rise in average yield per passenger compared to the same period in 2009.  Capacity was 19.8% lower primarily due to planned cuts in capacity (including at the London Gatwick base) but also as a result of volcanic ash disruptions to airspace.

Short haul passenger revenue decreased by 3.8% on Q2 2009 to €184.0m in Q2 2010.  The average yield on short haul routes increased by 13.8% while short haul passenger volumes declined by 15.8%.  Short haul capacity was 12.8% lower in Q2 2010 compared to Q2 2009 to due a reduction in the scale of activities at London Gatwick and enforced cancellations in April and May due to the closure of northern European airspace following the eruption of the Icelandic volcano. Short haul load factor in Q2 2010 declined by 1.5 points versus Q2 2009.

Christoph Mueller, Aer Lingus' CEO, commented: "Aer Lingus has delivered a significantly improved operating result in the first half of 2010 compared to prior year. This performance has been driven by strong unit revenue growth coupled with a significant improvement in our cost base. This operating result was achieved despite the adverse impact of volcanic ash disruption in H1 2010 as well as the continuation of difficult conditions in our key Irish market where unemployment is currently at 13.7% and where passenger numbers passing through Dublin Airport have declined by 16% compared to the first six months of 2009.

For the 2010 full year, we expect to report an operating performance (before exceptional items) of no worse than break even. This would represent a good performance in difficult market conditions but is predicated on the delivery of committed staff productivity savings and no further significant disruptions to operations from industrial action or airspace closures.

Looking to 2011, it remains too early to provide firm guidance on the Group's expected performance. Yields and passenger volumes will be dependent on the economic outlook in our main markets which remains uncertain.  However, we expect ongoing improvement in our cost base in 2011 as we continue to implement the Greenfield cost reduction programme."

Results detail

The yen is being driven by carry trade and risk aversion, says Roman Scott, managing director at Calamander Capital. He tells CNBC's Oriel Morrison that Japan should use the yen strength to buy assets abroad in order to mediate the appreciating currency:

Strong H1 results with improvements in costs and capacity rationalisation: Davy analyst, Joshua Goldman, commented - - "ANALYSIS: As suggested in its trading update in late July, Aer Lingus had a very strong H1. In the first half, the company had an operating loss of €19m, pre-exceptional, (Davy: -€57m) with EPS of -2.5c (Davy: -9.0c) .This is c.80% better than last year's H1 operating loss of €93m. The key to the company's strong results was capacity rationalisation, which allowed for higher yields, and cost reduction measures. Long-haul capacity was reduced by 31.6% while demand only decreased by 26.5%, leading to a load factor that was 5.2pp higher year-on-year (yoy). Along with the increased demand for business-class service, this contributed to the average yield increasing by 17.5%. Short-haul demand decreased by more than capacity, leading to a load factor 1.9pp lower yoy. In spite of this, yields increased by 9% yoy. Although total ancillaries were down 3.9% in H1 due to lower passenger numbers, the actual ancillary revenue per passenger was up to €18.32, a 7.8% increase yoy.

The company remains committed to reducing costs. As part of the Greenfield initiative, it has delivered staff savings of €11.7m in H1 with an annualised run-rate of €29.6m to the end of June. By the end of 2010, the company continues to target an annualised €50m of staff and €4m of non-staff cost savings. This will leave the balance (€43m) of the total targeted €97m in cost savings for 2011

DAVY VIEW: The company remains committed to the Greenfield cost saving initiative. Although we will re-examine our forecasts after the company’s presentation at 09.00 (live webcast at www.aerlingus.com; or by phone at +353 1 436 4265; confirmation #322 2220), an initial review suggests that Aer Lingus could achieve an operating profit in the range €10-20m. This assumes that the current issues with cabin crew on scheduling do not escalate. Although there is limited visibility into 2011, we believe that even without significant revenue improvements, the cost-cutting measures to be implemented and the full-year run-rate of those implemented in 2010 should allow Aer Lingus to continue to improve its operating results."

Economic View: Mortgage market still in the doldrums; Goodbody's chief economist, Dermot O’Leary, commented - - "As an illustration of why the Irish housing market continues to languish, one should look no further than the latest gross lending statistics from the Irish Banking Federation (IBF). The volume of mortgage lending fell by 38% yoy in Q2 2010, similar to the rate of decline witnessed in the opening three months. With average loan sizes falling, this translated into a 40% decline in the value of new mortgage lending in Q2. While there will continue to be little in the way of mortgage lending in the investor, top-up and re-mortgaging categories, the most disappointing element of the new figures was the reversal of the easing rate of decline for first-time buyers (-7% yoy) and mover-purchasers (-36% yoy).

Taking these trends, we now believe that gross lending will fall by a third in 2010, before increasing by 6% in 2011. To put this in context, the €5.3bn new lending expected in 2010 is a little over a tenth of the lending seen at the peak in 2006 (c.40bn). Taking this on board, we are often asked why is it that net lending is only down by a modest amount – down 3% from the peak in June 2010. Part of the reason for this is that the rate of repayment fell substantially over recent years as some struggling home-owners renegotiated mortgage terms. However, there is evidence over the past two quarters that this is starting to unravel. What this means is that the net lending will go sharply negative over the coming months, accelerating the deleveraging process for the banks and for the economy overall."

Rob Dobson, senior economist at Markit, joined CNBC for a look at the PMI numbers out of the Eurozone in August.

Markit PMI indices temper expectations for euro-zone growth: Davy's Aidan Corcoran commented -- "The European business cycle is often thought to lag the US cycle, and yesterday's euro-zone Markit Purchasing Managers' Index (PMI) results have done little to dispel the idea. But while US data have shown a marked deterioration in the economic outlook, the euro-zone PMI figures serve only to moderate the expectations for growth.

The headline composite service and manufacturing index came in at 56.1, disappointing forecasters who had pencilled in a smaller drop, from 56.7 in July to 56.4. The fall suggests that the euro-zone will struggle to match the 1% pace of the flash estimate of Q2 quarterly growth over the coming months. Flagging international demand weighed on the PMI index, with the export orders component of the manufacturing index falling from 55.4 in July to 54.4 in August.

Weaker demand for exports partly explains the drop in the German manufacturing index from 61.2 to 58.2. That international demand is suffering should have come as little surprise given the slew of negative data from the US. More detail will be available on the German accounts tomorrow, with the publication of the official GDP estimates for Q2.

We would caution against reading too much into the weaker PMI indices. The figures remain comfortably above the 50 mark which separates recession from expansion, and any disappointment among commentators may be partly due to extrapolation of the 1% GDP growth flash estimate. But this export-driven growth always looked vulnerable in the context of flagging international demand, while fiscal austerity looming over the UK and the periphery limits any upside potential. "

Johannes Seibert, MD at BMW Group Asia, says the carmaker is cautiously optimistic on the global economy. However, he speaks to CNBC's Chloe Cho, Yousef Gamal El-Din and Steve Sedgwick about why he is upbeat on the company's prospects in Asia: