The return to profitability at Aer Lingus is clearly welcome, but the airline is far from free of the problems which nearly caused its bankruptcy in 1993. As a company with over 8,000 employees and a turnover of nearly £800 million a year, Aer Lingus looms very large in Irish life. But it is a small player in world aviation and the operating profit of £53.2 million announced yesterday, represents a meagre return on sales of 6.7 per cent. Aer Lingus is not financially robust even if its condition is considerably healthier than it was some years ago.
Aer Lingus operated in exceptionally favourable circumstances in 1995. The bedrock of its business - the Irish economy - grew strongly. The environment for the international air transport industry was benign. The outlook for the present year is good but the aviation business is notoriously cyclical and Aer Lingus cannot be certain of fair weather ahead. Much of the airline's growth has come from tourism. This is valuable for the economy as a whole but does not provide the kind of yield per passenger that makes an airline strongly profitable.
Even as Aer Lingus was announcing a return to profitability - and sharing £3.3 million of those profits with employees - it faced the prospect of industrial unrest at TEAM Aer Lingus and Airmotive plus a pay claim in excess of 5 per cent from SIPTU, its largest union. The problem at TEAM Aer Lingus is partly due to an inter union row which the company cannot do much to resolve, but nonetheless the dispute cannot bring any comfort at a subsidiary which is still losing money, and whose workers have shown a willingness and ability to hurt Aer Lingus customers by disruption at Dublin Airport.
The SIPTU demand, if it materialises in its present shape, will represent almost exactly the amount that members have foregone in pay rises under national pay agreements in order to bring Aer Lingus back from the brink of financial collapse. This suggests that the return to profitability is viewed by SIPTU as an invitation to recoup the sacrifice which contributed to the profits in the first place. It is a dangerous delusion to think that Aer Lingus can return to the days of easy going concessions on pay and conditions.
The challenge for the Aer management is to build on the moral which the staff has in a company which has emerged from black days, without engendering false hopes that the profits can take the shape of instant pay rises. Aer Lingus is not ready for that.