Profits after tax fell 5 per cent to €77.4 million at Aer Lingus last year due to the combined costs of mounting a defence to Ryanair's takeover approach, a sharp rise in the price of fuel and the effects of a terrorism incident in the UK last summer.

The airline said it spent €16.2 million on fees defending the takeover approach from Ryanair. Fuel costs, meanwhile, rose by €61.7 million to €200.6 million. On the plus side, turnover at Aer Lingus rose by 11.3 per cent to €1.1 billion, while the company achieved maintenance cost savings of €4 million.

Chief executive Dermot Mannion said that the airline was well-placed for further growth. "We are continuing to grow our short-haul network, grow ancillary revenues and reduce unit costs," he said. "We are well-placed to achieve our growth objectives in 2007."

The airline's load factor, the number of seats it fills in each aircraft, declined from 81.4 per cent to 77.6 per cent.

The company said this reflected increased competition on routes to the US from Delta and American Airlines.

It also opened a new route to Dubai in the Middle East. The Dubai service achieved an average load factor of 62 per cent in 2006, with the figure increasing to 80 per cent in January and February.

Average fares increased during the year: by 3.9 per cent to €91 on short-haul routes and by 6.9 per cent to €280.90 on long-haul flights.

Revenues at the airline rose by double-digit figures across the board. Passenger income was up 10 per cent to €998 million while ancillary revenue, which includes on-board catering, increased by 34 per cent to €63.4 million.

Aer Lingus boosted its cargo income by 19 per cent during the year to €49.5 million.

This followed a restructuring of that business under new management.

Other revenue, which relates to rental income and services provided to third parties, rose by 16 per cent to €5 million.

Traffic on the airline's short-haul routes increased by 9.3 per cent to 7.5 million passengers. Twelve new short-haul routes were added during 2006.

On long-haul services, the airline increased its passenger numbers by 4.4 per cent to 1.1 million.

Mr Mannion welcomed the possibility of an open-skies agreement being reached between the US and the European Union.

This would allow Aer Lingus to fly to an unlimited number of cities in the US.

Aer Lingus will take delivery of two new long-haul aircraft in May and June that it hopes to operate on new routes to Orlando, San Francisco and Washington.

The airline is also currently in negotiations with Boeing and Airbus for an order of 14 new aircraft.

A decision is expected to be taken by its board of directors at a meeting in May.

Having introduced charges for checked-in baggage last year, the company is now planning to introduce a fee for seat selection on short-haul flights.

Passengers will be asked to pay about €3 when picking their seat at the time of booking.

This charge will be introduced on a pilot basis before the summer.