Trials and tribulations pursue Aer Lingus

First there were the strikes. Then came the foot-and-mouth scare, followed by sexual harassment claims against its top executive. August saw the tragic death of chairman Bernie Cahill and then there were last week's horrific events in New York and Washington, which have sparked an immediate worldwide aviation slump. It really has been a rotten year for Aer Lingus.

The year started quite well for the national airline. It had turned in profits of £60 million (€76.2 million) the previous year and an end to the industrial relations problems that had bedevilled the group for much of 2000 was in sight. With the unions on board, the airline management could reactivate the flotation plan that had been put on hold the previous summer when a barrage of pay claims led to industrial relations havoc at Dublin Airport.

Mr Michael Foley, the chief executive of three months, was keen to get on with the process of bringing the company to the market. Long before foot-and-mouth disease threatened, he could see clouds on the horizon. The US economy was slowing down and with it would come a fall in global air traffic and decline in the value of airlines.

By March, however, Aer Lingus was in serious trouble. Despite negotiating a series of pay deals that had added £20 million to its annual wage bill, the firm had still not made peace with its workers. Two 24-hour strikes in March and April cost the company millions in revenue as measures introduced to stop the spread of foot-and-mouth disease to Ireland began to bite. The firm reported a 20 per cent drop in bookings from Britain, France and Germany, the key European markets. For the first time since it faced insolvency seven years ago, chairman Mr Cahill called an emergency board meeting. The firm let it be known that profits in 2001 would be at least £45 million down on 2000 at £15 million.

Then came the next bombshell. Reports began to circulate that a senior executive in the company had been accused of sexual harassment by two female workers. Within days the company's chief executive, Mr Foley, has been identified as the executive. Mr Foley, a former senior executive with Heiniken in the US, vehemently denied the allegations and vowed to fight them. He sought to injunct the airline from removing him from his position when a board sub-committee upheld the allegations. Aer Lingus successfully challenged the injunction and Mr Foley was dismissed.

His departure in June - the fifth by a chief executive in 10 years - saw Mr Cahill return to the position of executive chairman which he held seven years previously when he oversaw the rescue of the airline. Some questioned whether the 71 year old chairman was up to the job, but others took comfort in his record. In 1993, he negotiated a consensus that saw the Government inject £175 million into the bankrupt airline while the unions agreed to 1,300 job losses.

On that occasion its was another conflict - the Gulf War - that brought the Irish airline to its knees. The Cahill plan was the basis of Aer Lingus's subsequent revival, but the low labour cost base it created was also the seed of the current crisis. As wages in the Republic rose rapidly in 1999 and 2000, the 6,600 staff at Aer Lingus were left behind by the winners in the Celtic Tiger lottery. The catching up that was at the heart of the last two years of labour unrest will have added £30 million to the cost base by the time the last deal - with the pilots - is done.

Mr Cahill set about his task. A root and branch review was instigated against the background of an accelerating global economic slowdown. But on Friday, August 18th, Mr Cahill was mooring his boat near his home in west Cork, when he died in an accident.

His death created a vacuum at the top of Aer Lingus which was only filled at the end of last month with the appointment of outgoing AIB chief executive Mr Tom Mulcahy. The decision by one of the State's most able and respected executives to take on the task - which pays only a token salary - was a huge boost to morale at the company. Then, at 8.45 Eastern Standard Times last Tuesday, American Airlines Flight 11 was flown into the North Tower of the World Trade Centre.