AER LINGUS is likely to seek about 500 redundancies among its 3,879-strong workforce when it unveils its latest restructuring plan in the coming weeks, sources close to the airline have told The Irish Times.
This will form part of a major restructuring plan aimed at shaving €130 million from Aer Lingus’s cost base in a bid to return the airline to profitability.
The cost cutting is likely to include double-digit pay cuts and an end to the so-called “legacy” work practices at the airline.
Aer Lingus yesterday reported an operating loss of €93 million for the first six months of 2009. This was a record half-year loss for the airline and equated to it losing €511,000 a day.
At a press briefing, Aer Lingus chairman Colm Barrington said he could not rule out compulsory redundancies if an agreement cannot be reached with its trade unions. “We have to change Aer Lingus, it cannot go on the way it is,” he said. “We have to do whatever has to be done.”
Mr Barrington said the airline was faced with a future that included a continued decline in fares, rising fuel costs and intense competition.
It is understood that about €60 million of the loss in the first half of this year related to Aer Lingus’s transatlantic flights, even though they only account for about 8 per cent of its passengers.
The airline saw its premium class business decline by one-third on flights to the US, with just 30 per cent of seats being filled in the front of the plane at some times.
Further cuts to Aer Lingus’s transatlantic services are now likely for the coming winter schedule. The airline said yesterday that its Shannon-New York service “remains under review”.
Aer Lingus is believed to be under pressure from the Government to retain this service and it is understood the airline might offer a compromise that will see some flights from Dublin to New York stopover at Shannon.
Mr Barrington said: “Aer Lingus has always been a mainstay of air services at Shannon and will remain as such, provided that commercial realities support that decision.”
The restructuring plan will be unveiled, probably in early October, by Aer Lingus’s new chief executive Christoph Mueller, who takes charge next Tuesday. Mr Barrington said he did not see any signs of improvement in the domestic economy. “I don’t see any signs of green shoots in our Irish economy.”
While Aer Lingus’s passenger numbers rose by 1.7 per cent to 4.93 million, its total revenue declined by 12.2 per cent to €555 million due to reduced fares and cargo revenues.
A weakening in passenger numbers in the Republic was offset somewhat by the addition of new bases in Belfast and London Gatwick, which opened last April.
Aer Lingus’s average fare declined by 17.1 per cent in the first six months of this year, while fuel costs rose by 10 per cent to €189.6 million.
The airline’s net cash balances fell to €439.6 million at the end of June from €802.6 million a year earlier. The airline is likely to have less than €300 million in net cash by the end of this year.
Finance chief Seán Coyle said a recent deal to defer the order of new aircraft from Airbus had given Aer Lingus “some breathing space” in terms of cash burn.
“[But] the business needs to be changed radically in order to be viable into the future,” he added. “Serious action needs to be taken to rectify the cost base.”
Mr Barrington said there would be no repeat of the generous voluntary severance terms of previous redundancy packages. The last restructuring plan, still being implemented, cost Aer Lingus €120 million.
“I certainly wouldn’t contemplate going anywhere near that,” he said.
Siptu’s national industrial secretary Gerry McCormack said last night that the union would not speculate on issues such as redundancies or salary cuts until the company put proposals on the table.