Aer Lingus records €93m loss

PAY cuts and redundancies may be in the offing for Aer Lingus staff at Shannon Airport, following an announcement by the airline of a loss of €93 million for the first six months of the year.
Aer Lingus chairman Colm Barrington said last week that if staff don’t “work at market conditions and market rates we won’t survive”.
The company is due to announce a hard-hitting survival plan in the couple of months and, as well as pay cuts, it is speculated that there will be between 500 and 1,000 redundancies.

Aer Lingus is also set to re-examine its routes, which could result in the ending of its Shannon-JFK route, which was given a reprieve at the 11th hour earlier this year.
In a statement, Mr Barrington outlined some of the difficulties the airline is fighting against. “The market environment continues to be very challenging, with total revenue falling by 12.2%. The scale of the operating loss clearly illustrates the extent of the challenges facing Aer Lingus in the current environment. While traffic volumes have stabilised, consumer confidence remains weak and we see no sign of any improvement in the near term. We continue to experience a significant reduction in average fares, which are down 17.1% in the period. Our results in the period have also been adversely affected by the imposition of the €10 passenger departure tax in Ireland, which we believe is very short-sighted and counter-productive in the current, very difficult conditions being faced by airlines and by the Irish business and tourism sectors.”
He claimed that there is no option but to make changes.
“This revenue environment, coupled with an uncompetitive cost base, means that we must now take difficult but necessary steps to address our business model and cost base so that we ensure Aer Lingus is viable over the long-term.”
Aer Lingus’ new CEO Christoph Mueller began work this week and according to the company, he “will execute the strategy to return the business to profitability”.
While Aer Lingus passenger numbers actually increased, the average fare for the period declined by over 17% on the same period in 2008, with long-haul prices falling most. Fuel costs also increased by 10%, costing the airline €189.6m.
The half-year results show that staff costs fell during the period. “Staff costs, which represent 23.5% of operating costs, decreased by 9.1% to €152.1m, as a result of agreements reached with staff in December 2008 and also the pay freeze in operation across the group. In addition, average numbers employed fell by 4.2% to 3,879, despite the additional staff recruited for our Gatwick base.”
Tony Carroll of SIPTU said he felt that the union’s members at Shannon Airport had already made sacrifices that had helped to improve the airline’s sustainability.
“What SIPTU is saying is that our members were hit earlier this year and any wage reductions will have to come from people who have not made a contribution yet. We wouldn’t expect that our members would be taking too big a hit.”
Mr Carroll also said that he didn’t believe that there was scope for further reducing the amount of Aer Lingus staff working at Shannon Airport.
Meanwhile, Deputy Joe Carey criticised Aer Lingus for not using the Shannon preclearance facility.
“It beggars belief that any company operating at a loss in the current climate would not avail of opportunities to increase revenue and add value to its business. I cannot understand the Aer Lingus decision to snub the US preclearance facility at Shannon, particularly when other major airlines have jumped at the chance to use the service.”
He said that while the company was preparing cutbacks, they weren’t taking opportunities. “There are reports that job losses and wage cuts are planned. Yet how can workers take seriously the efforts of management, when the same management is not making the best use of revenue opportunities?” he said.