The Board of Aer Lingus was meeting at its Dublin airport headquarters last night to consider an emergency recovery plan which was rumoured to include jobs cuts of 40% and an appeal to the government for support.
Company officials said yesterday that the airline cannot afford to pay for the redundancies it needs to have a viable future. One said: "We need to cut capacity by 25 per cent but costs need to come down by more than that."
Even before the attacks on the US, demand had started to fall as a result of the economic slowdown in both the Irish Republic and the US, but since September 11th bookings on transatlantic flights, which previously contributed about 60% of the airline's profit, have fallen around 80%.
The airline has responded by cutting fares by up to 70% on 26 of its routes, but it is losing as much as I£2m a day and is expected to run out of cash early next year. Officials said the combination of extra security costs and the collapse in ticket sales will push losses this year to I£60m.
A spokesperson said: "We have not asked for government intervention yet but if the recovery plan involves downsizing the company, we do not have the wherewithal to pay for it."
Newly-appointed chairman Tom Mulcahy is expected to announce details of a survival plan later in the week, and it is sure to include further government assistance for the state-owned airline. What form this can take is a vexed question. The EU is so far standing reasonably firm against further state aids for cash-strapped European airlines, yet both the Belgian and Swiss governments have supported their airlines in ways that clearly breach state aid guidelines, and a number of EU governments are putting pressure on Brussels to soften the rules in this crisis.
Aer Lingus's unions are predictably baying for government cash. The IMPACT trade union is warning that direct transatlantic flights between Ireland and America may cease altogether if Aer Lingus is not given state support, and called on the Government to support the national airliner in the interests of the wider economy. The union said if direct transatlantic flights disappear, there would be a disastrous effect on tourism.
IMPACT warned that it could prompt high-tech US multinationals to relocate
investment and jobs to European countries where staff and freight could
be flown directly to and from the USA.
Politicians also headed for the great money trough in the sky: Fine Gael spokesman on public enterprise Jim Higgins TD said last night that the Taoiseach must now get involved to try and persuade EU Heads of State to agree to member states giving financial aid to their ailing airlines: "The loss of 2,500 jobs will devastate Aer Lingus and could validly be interpreted as stage one of a total shutdown of the airline. You simply cannot reduce staff levels by 40% without having a drastic negative effect on passenger numbers and service quality which in itself will be self defeating."
"In view of the fact that EU Finance Ministers have set their faces against any financial rescue package and in view of the tepid attitude of transport ministers, the Taoiseach must now intervene at heads of state level if policy is going to be changed and Aer Lingus saved," said Deputy Higgins.
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