Aer Lingus seeks chief to keep its profits flying high

The incoming chief executive of Aer Lingus will be expected at least to maintain the company's current profit performance and to ensure that margins remain strong next year, it has emerged.

Following a board meeting yesterday, the airline said it had set a "challenging budget" for 2005.

"Fares are continuing to fall in the aviation market and, if the airline is to compete in this market place, its costs must also fall," a statement said.

It is understood that the budget - agreed by a group of senior managers - commits Aer Lingus to at least match this year's operating profit, which is likely to come in at about €105 million.

Operating margins, which have been rising strongly under current chief executive Mr Willie Walsh, also need to be maintained, if not bettered, the budget states.

Aer Lingus has some of the most aggressive targets for margins in the airline industry and any new management team will be charged with finding ways of meeting the ultimate target of 15 per cent. Last year the airline achieved an operating margin of 9.3 per cent.

There is a determination among senior managers that the financial gains made over recent years are not frittered away under a new management team.

"The competitive pressures facing the airline continue to intensify," the statement warned.

Analysts expect fares to drop further in the first half of next year and, with fuel costs expected to remain high, competition between carriers will be intense.

The board yesterday appointed a sub-committee to select a successor to Mr Walsh.

The sub-committee comprises chairman Mr John Sharman and board members Mr Seán FitzPatrick of Anglo Irish Bank and solicitor Mr Ivor Fitzpatrick.

It is understood that the three board members will appoint a headhunter to advertise the post and compile a shortlist of potential candidates.

The three directors are expected to take part in the interviews that will follow this process.

The departing executives - Mr Walsh, chief financial officer Mr Brian Dunne, and chief operations officer Mr Séamus Kearney - have indicated that they will remain in place until replacements are appointed.

A statement from the company said the three would work towards a "smooth transition".

The Department of Transport is continuing its search for a chairman for the airline. A spokesman said it hoped to have a chairman in place before the end of the year.

Several prominent business figures have already turned the position down, including Mr FitzPatrick and Mr Niall FitzGerald of Unilever plc.

The Cabinet sub-committee on the options for Aer Lingus is expected to meet next week. There is still deadlock among the members but support is said to be growing for some kind of private investment.