Aer Lingus may have to go bankrupt before it can receive fresh loans from the Government. European Commission sources said last night that the strict rules on State aid may require the national airline to be insolvent before the Government can step in with a guaranteed loan.
The Government yesterday gave a commitment to save Aer Lingus and also on the future of Shannon airport which may be threatened. The Minister for Public Enterprise, Ms O'Rourke, told the Dβil that "Government policy is that both Aer Lingus and Shannon survive as viable entities going forward".
Aer Lingus sources claim a loan or some other State aid will be needed to cover the cost of a redundancy programme, confirmed yesterday, which will cut 2,500 of the 6,300 permanent jobs at the airline.
The cost of the programme is put at around £125 million and funding it would be impossible for the airline, which says it is losing £2 million a day following the September 11th terrorist attacks on Washington and New York.
A similar loan has already been extended by the Belgian government to Sabena, the cash-strapped Belgian airline which has sought bankruptcy protection. Commission sources said that Aer Lingus - which says it will run out of cash next February - may have to follow a similar route.
"This is not something that is good for a company to do. But it's true that the number of options now are extremely limited," one official said. The commission has ruled out any direct State aid to airlines in the current crisis, but has allowed a number of limited measures.
Mr Larry Stanley, the acting chief executive of Aer Lingus, wrote to staff yesterday confirming the size of the job cuts. He said the restructuring plan had not yet been finalised. Up to 2,000 jobs will have to go by the end of November,
Union leaders came away from a meeting with senior management yesterday seriously questioning company strategy.
It emerged that proposals to cut jobs by 2,500 were based on a calculation that, with average wages of £38,000, such a level of redundancies would yield £95 million out of the £130 million needed in operating cost savings to break even by 2003.
The company also told union leaders it had yet to do an exercise to see if the company could remain operationally viable after shedding 700 temporary and 2,500 permanent staff.
IMPACT, which represents pilots, middle management and most cabin crew, accused the company of "jumping the gun by announcing 2,500 more job cuts before it had completed its restructuring proposals and discussed them with staff representatives".
Ms O'Rourke will be briefed on the plan by Mr Tom Mulcahy, the Aer Lingus chairman on Sunday.
She will fly to Luxembourg the following day for a key meeting of EU transport ministers and the European Transport Commissioner, Ms Loyola de Palacio.
The Commissioner yesterday announced a package of measures aimed at helping European airlines to survive.
They will be presented at next week's meeting and include compensation for losses resulting directly from the four-day closure of US airspace following the attacks and a ruling that all new security measures should be funded by member-state governments.
Department officials last night played down a report that the Commissioner will try and link the aid package announced yesterday to a proposal by the Commission that would allow Brussels to negotiate all aviation deals on behalf of the EU with the US and other countries.