SHARES IN Aer Lingus dropped 4.3 per cent to €1.56 after the airline said it would struggle to make a profit this year because of soaring fuel costs and weaker economies. The company said it would cut one US route this winter and reduce its long-haul seat capacity.

Ahead of its annual meeting yesterday, the airline said it expected "at best" to break even this year, based on fuel costs and an uncertain outlook. It based this assumption on fuel costing about $125 a barrel, though oil surged to $137 yesterday - its biggest two-day gain in more than six years.

Aer Lingus said it would reduce capacity on its long-haul routes by 15 per cent this winter and suspend the Dublin-Los Angeles route from November 2nd as a consequence of "unprecedented increases in fuel costs, the weak dollar and slowing economies".

The share price fell as much as 8 per cent to €1.50, the lowest price since its flotation in 2006, in response to the gloomy outlook. The airline now has a market value of €832 million, down from €1.5 billion at its flotation.

Aer Lingus chairman John Sharman said: "The unprecedented cost of fuel and the difficult operating environment are continuing to have a significant negative impact." He told shareholders he had used the word "unprecedented" four times in his statement to the meeting to describe escalating fuel prices and the challenges facing the aviation industry.

After the meeting, chief executive Dermot Mannion said: "In these days of high fuel prices, there are going to be casualties across the industry. Aer Lingus is in a very strong position. We will not be a casualty."

The Dublin-Los Angeles route, the airline's longest flight and biggest "fuel burn", had been "the first casualty", said Mr Mannion. The airline had no plans to ground short-haul aircraft this winter, though it may consider "cancelling or deferring" flights, he said.

The company's passenger numbers for May rose 10.4 per cent to 946,000, compared with May last year, but the "load factor", or proportion of seats filled, fell 4.2 points to 76.1 per cent. The long-haul load factor dropped 7.8 points to 71.2 per cent, though capacity rose by one-third with three new US services.

The short-haul load factor fell 1.1 point to 80.2 per cent, though capacity increased 19.6 per cent.

Passenger numbers rose 11 per cent to 4.15 million for the first five months of the year, while the load factor fell 6.2 points to 70.9 per cent. The long-haul load factor for the first five months was down 11.8 points to 66.6 per cent.

Mr Mannion said one long-haul aircraft would "probably" be grounded over the winter. The company will now take delivery of two new Airbus aircraft, deferring one delivery until 2010.

The frequency of long-haul services out of Dublin and Shannon will be affected between January and March 2009, as the company refurbishes three existing aircraft.

The company withdrew three special resolutions on housekeeping matters relating to share transactions after being blocked by Ryanair, which holds a 29.2 per cent stake in Aer Lingus.