The following is the full text of a letter sent to Aer Lingus employees yesterday by the company's acting group chief executive, Mr Larry Stanley:

Dear Colleague

I know that the last month has been a time of great worry to everybody as we struggle to come to terms with what is undoubtedly the greatest crisis to ever hit the world airline business.

We are facing the most serious threat to our survival that we have ever encountered. We are part of an industry in crisis. There is no point in pretending differently. It is vital that we all know exactly how serious our situation is. The losses we face are truly staggering. They exceed anything we ever anticipated in Aer Lingus and right now it is survival that is our challenge.

Before the tragic events of 11 September in the USA we were facing severe problems. The Foot and Mouth situation in the early part of the year had hurt us and the downturn in the world economies compounded things. The fall off in business traffic, in particular, had a severe impact on what is the most profitable part of our business.

In the past, during bad years, we frequently had advance warning and the time to anticipate a downturn and take steps to prepare for it. Even this year, although the downturn in the first and second quarters hit quickly, we were still hopeful of a recovery in business traffic in the later part of this year or at least in 2002. We were already planning to take steps to address the trading situation pre-11 September. It is now painfully obvious that customer demand which was already on the decline will take a considerable time to get back to even the reduced level which prevailed before 11 September. Many of our customers are simply not yet ready to fly and the attacks on Afghanistan may further discourage passengers from travelling.

We have taken the initial steps to adjust our schedules to match the decline in demand. As you all know we have had to cut our schedules by 25 per cent and we have taken unneeded aircraft out of the fleet to this effect. These schedule and fleet reductions will continue into next year's summer schedule, as there is little prospect of any recovery in demand in the short term. As I write this we are also cancelling further flights where we can combine loads.

In addition cost savings already announced include:

Non-payment of the PPF 5.5 per cent pay increase.

Release of temporary staff.

Cadet Pilot and Apprenticeship programmes cancelled.

Capital projects terminated.

Contracts with suppliers re-negotiated or cancelled.

Absolute embargo on any non-vital expenditure.

As well as cost reductions, we have on Monday announced significant fare initiatives in an attempt to stimulate traffic in our markets. These fares, which are available right across our network, are for travel into and out of Ireland, and represent outstanding value for customers. Return fares including taxes, range from £59 Ireland-UK, £99 Ireland-Europe and £169 Ireland-USA. The fare from the US is $198 while prices from the UK are as low as GB£49.

Unfortunately the initiatives already taken cannot solve our problems. In spite of them every day our costs will continue to exceed our revenues. That eats away our cash balance at the rate of £2 million a day. And, if we run out of cash, we can no longer operate an airline.

Therefore we have to find ways of reducing our cost base further and the stark reality we have to face is that we cannot prevent the need for substantial job cuts.

Since the events of 11 September, the management team has been grappling with the complexities of the situation. I know that the uncertainty in regard to the scale of further job losses has been a deep source of worry to you all. But we must ensure that the survival plan, which we are working on, is a complete one which will give the airline the prospect of survival into the future. That is why it is taking time to develop such a plan.

We are now at the final stages of putting together a survival plan for Aer Lingus which we must put to our board and our shareholder - the Government.

This plan while not yet complete will call for a saving in costs of at least £130 million per annum. Even allowing for the achievement of very challenging overhead and direct cost savings we have no alternative but to have a much reduced workforce if the plan is to have any chance of succeeding. I know that media speculation on the numbers of jobs, which will have to go, has been adding to everyone's concerns. Until the plan is complete and approved we cannot comment on the exact figures but I can confirm that we have to target reductions in the permanent work force of the order of 2,500 jobs. We are not alone in this crisis. It is impacting on airlines throughout the world. Already job losses in the industry run to well over 150,000. Other airlines have gone into bankruptcy or have been temporarily bailed out by short-term guarantees. But these temporary measures may only postpone the inevitable for a number of them.

While much of what has happened during the past four weeks may seem incomprehensible, it is critical that all of us understand the seriousness of our financial predicament. And I hope this explanation has helped in that understanding.

I have to ask for your patience in these difficult days. We must continue to serve our customers in the way that they expect from Aer Lingus. We have to do our utmost, in spite of our worries, to generate more business. And we must continue to implement every way of cutting cost while running as efficient an operation as possible.

I recognise that I am asking a lot from you. I do appreciate your efforts and I will be communicating with you as soon as I possibly can to give you further information. In the meantime I am counting on all of you to maintain your efforts.

Larry Stanley

Group Chief Executive