AER LINGUS has warned that the outlook "remains uncertain" due to the economic downturn, the high price of oil, the weakness of the dollar and sterling and increased competition.

There was some good news however for the airline yesterday with management and Siptu agreeing compromise proposals on the introduction of a cost-cutting and work practice change plan.

In an interim management statement issued yesterday, Aer Lingus said its revenues increased by 10.3 per cent in the first four months of 2008, while passenger numbers were up by 11.1 per cent to 3.2 million.

Load factors, however, declined due to an increase in capacity on both short and long-haul routes and the airline said it would make an operating loss in the first half of the year.

"The unprecedented cost of fuel and the difficult operating environment are having a negative impact on the financial performance of the business," the company said.

The Aer Lingus share price closed in Dublin up just more than 1 per cent at €1.869.

Under the deal reached with Siptu, Aer Lingus is to implement work practice changes in 10 of the 13 ground operation sections which are represented by the union.

New talks are to take place at the Labour Relations Commission in Dublin next week to try to reach agreement on the remaining sections, which include aircraft loading personnel in Dublin and Shannon as well as clerical staff in Dublin.

These sections had voted against the plan.

Last month, a majority of the 1,800 ground operation staff represented by Siptu voted to accept the work practice changes, which are aimed at generating €10 million in cost savings.

Under the union's rules at the airline, the deal fell as it was not accepted by all the sections.

The compromise proposals emerged after a meeting of Siptu shop stewards yesterday.

Siptu said it rejected the company's plan to implement unilaterally the work practice change proposals.

"However, in an effort to avoid a damaging dispute for the employees, the company and the travelling public," a statement from Siptu added, "the shop stewards committee has unanimously endorsed a proposal for an interim agreement to allow the implementation of the proposals in the areas which have accepted them."

Aer Lingus has welcomed the statement.

The airline will lift a controversial pay freeze for the ground operation staff once the new work practice changes are in place.