Aer Lingus to discuss €100m cuts

AER LINGUS’S board of directors will meet today to consider proposals to cut up to €100 million from its annual costs. They will have their work cut out.

While there might be broad agreement about the need to trim costs, it’s hard to imagine the chief brother David Begg wearing major job cuts.

Begg, it seems, did not attend the board meeting held at the beginning of last week, where an outline of the proposals was delivered by management.

It is understood that other board members have reservations about the direction in which Aer Lingus is heading.

Outsourcing a large number of functions is also believed to have set alarm bells ringing within Government buildings. Outsourcing jobs in a company 25 per cent owned by the taxpayer would be difficult to sell at the best of times, but particularly now that dole queues are lengthening.

The cuts being considered are deep. Dermot Mannion is now thought to want to axe 1,500 jobs from catering, ground operations and cabin crew at Dublin, Cork and Shannon.

The airline is also squeezing the Shannon Airport Authority for a better deal on passenger charges. Aer Lingus is believed to be seeking a deal for its transatlantic operations similar to that secured by Ryanair a few years ago on short-haul flights.

That deal was based on Ryanair meeting some demanding targets on traffic growth. Ryanair now accounts for about 50 per cent of Shannon’s traffic.

It is difficult to see how Aer Lingus could improve the passenger flow from Shannon to the US to justify large cuts to charges. To complicate matters, any transatlantic deal for Aer Lingus would have to be offered to other operators over the Atlantic, notably Continental Airlines. That’s a runway that the airport manager won’t want to taxi down.

One possible scenario thought to be under consideration is a reduction in passenger charges for the quieter winter months. That would safeguard a year-round service for Shannon and save money for Aer Lingus.

This is a crucial time in Mannion’s stewardship. After three years at the controls, some are questioning his leadership and vision for the airline.

The success of the IPO was hijacked by Ryanair’s bid; the axing of Shannon-Heathrow was a PR disaster; and the €20 million PCI-07 cost-saving plan, which caused so much heartache with trade unions, has yet to be fully implemented. Plans to expand the fleet and add routes have been overtaken by the economic crisis.

Mannion’s vision would appear to be the creation of a leaner airline with modern work practices and radically reduced costs. It remains to be seen if his fellow stakeholders will agree.

This article appears in the print edition of the Irish Times