Aer Lingus yesterday revealed its cost-cutting programme, saying it plans to target 12 key areas, but revealed very little detail. Claire Shoesmithreports.
In a circular to shareholders that reiterated the former State airline's opposition to Ryanair's proposed €1.4 billion takeover, Aer Lingus said that it would be looking at specific initiatives in staff costs, such as employee contracts, pay grades, overtime and air crew productivity.
In addition, it said that it would also seek to reduce airport costs, renegotiate maintenance contracts and increase aircraft utilisation in a bid to lower overheads.
"The plan aims to drive significant unit cost reductions and efficiencies by targeting key areas of cost across the organisation," Aer Lingus said in the circular.
A spokeswoman for the company declined to elaborate on the individual elements of the programme, saying that it was part of an ongoing process aimed at increasing value for Aer Lingus shareholders.
The cost-cutting programme was brought forward after the Takeover Panel ruled that the company must outline its proposals by yesterday, following earlier references to it in its defence document.
Aer Lingus also said that it expected an extra €25 million in revenue next year from additional charges for baggage and advance seat selection. In August, the airline announced plans to start charging for baggage, following in the footsteps of rival Ryanair.
Analysts were somewhat sceptical of yesterday's announcement, saying that the lack of precise figures or details made it difficult to assess its potential effectiveness.
And while there is no doubt about the need for cost cuts, John Sheehan, an analyst at NCB, said the room for manoeuvre in certain areas of the company was limited.
The measures outlined in yesterday's document fall far short of the cost-cutting measures that Ryanair chief executive Michael O'Leary has said that he would implement if he was to take over Aer Lingus.
A spokeswoman for Ryanair declined to comment on the proposals and the company's unions said that they were reserving judgment for the time being.
In yesterday's circular, the chairman of Aer Lingus, John Sharman, reiterated his belief that the Ryanair offer "significantly" undervalued the company and he urged shareholders yet again to reject the offer.
The deadline for acceptances is Monday.
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