Aer Lingus on course to record losses of €100m in 2009

AER LINGUS chief executive Dermot Mannion warned yesterday that the airline could make a loss of about €100 million in 2009 if the price of fuel remains high and consumer demand remains weak.

Mr Mannion said the airline would respond by undertaking a "fundamental root-and-branch review" of all costs at the airline in an attempt to return to profitability.

He declined to specify what cuts would be sought but informed sources suggested Aer Lingus could seek to trim its overheads by up to €100 million a year.

Such a move could result in job cuts among the 4,000-strong workforce and a radical shake-up in work practices and rates of pay.

"Everything is up for review," Mr Mannion said.

It is understood Aer Lingus will put its proposals to staff in late September.

Both Siptu and Impact said they would await the proposals before passing judgment on them.

Commenting on the Aer Lingus result, Siptu branch organiser Teresa Hannick said: "Siptu members have already contributed savings worth €11 million a year to the airline. As we demonstrated earlier this year, making savings and improving competitiveness can be achieved without pay cuts."

Mr Mannion's stark warning followed the publication of half-year results by Aer Lingus yesterday, which showed it made a loss of €20.2 million in the first six months of this year.

The Aer Lingus boss said the airline would, at best, break even in the traditionally busier second half of the year. Stock market analysts warned that Aer Lingus could end up recording losses for the full year of up to €30 million.

Aer Lingus said its total fuel bill for 2008 was likely to be €390 million, an increase of just under €140 million on last year. The airline expects to spend €463 million on fuel in 2009. About 20 per cent of its fuel requirement for next year is hedged at around $117 a barrel.

In a bid to save money, Aer Lingus has decided to suspend its Dublin to Los Angeles flights this winter and to cut three short-haul services within Europe.

Aer Lingus has already agreed €20 million in cost savings with staff and trimmed the same amount from its annual aircraft maintenance bill.

Aer Lingus's results show that it carried 4.86 million passengers in the first six months of this year. This was up 10.5 per cent on the same period of 2007.

Its revenues rose by 10.2 per cent to €632.9 million, although this increase was virtually wiped out by the rise in its fuel bill.

The average fare fell by 2.6 per cent to €110.43 as a result of strong price competition, while the number of seats filled on each aircraft declined five points to 70.2 per cent.

Revenues from baggage fees, in-flight meals, travel insurance and ancillaries rose by 38 per cent to €69.7 million in the period.

This article appears in the print edition of the Irish Times