Troubled Aer Lingus slumps into the red

Aer Lingus will record losses this year even if bookings recover in the second half, the Minister for Public Enterprise said last night.

Ms O'Rourke's comments indicate the company's trading position has worsened since April, when a special board meeting was told profits this year would fall to £15 million (€19 million) from £60 million in 2000.

Stating that "internal difficulties over which the airline has control" should be resolved speedily and effectively, Ms O'Rourke said she was determined to move the company into the private sector.

She was speaking in the Dail after Fine Gael's public enterprise spokesman, Mr Jim Higgins, moved a private members' motion urging Ms O'Rourke to abandon preparations for a possible trade sale. Mr Higgins said the proposal was "absolutely ridiculous".

But Ms O'Rourke insisted the Government remained committed to privatisation as the best option for Aer Lingus.

Strong, resolute decisions were required, she said. "Unless those decisions are taken soon, less palatable choices could emerge which would not be in the interest of the airline, its customers or its employees."

Aer Lingus has been without a chief executive since last week, when it sacked Mr Michael Foley after two complaints of sexual harassment were upheld against him. Mr Foley denied the charges.

Ms O'Rourke said: "I regret that Aer Lingus has been in the headlines recently for all the wrong reasons but it is emphatically not in a terminal crisis. Let me put on record that I do not intend to let such a crisis develop."

Citing the recovery plan developed by the company's chairman, Mr Bernie Cahill, in the mid-1990s, she added: "I do not intend to preside over a Cahill Plan mark two." "

Ms O'Rourke said the company's performance this year will be "seriously affected" by the impact of one-off factors such as strikes last winter and foot-and-mouth. The US downturn and an emerging slowdown in international aviation would present deeper difficulties.

She said: "I understand that the above factors when combined with the significantly increased cost base as a result of recent pay settlements and higher fuel costs are likely to result in the airline moving into a loss situation for 2001 even if there is significant recovery in performance over the remainder of the year."

US bilateral agreements meant the company had to remain within Irish ownership to operate US routes, she said. To operate in the EU, it had to remain in EU ownership.

Ms O'Rourke said her corporate finance advisers had made recommendations on mechanisms to ensure Aer Lingus can "continue to be regarded as an Irish airline".